In the introduction to due diligence, we explained the importance of engaging in extensive due diligence prior to purchasing a business, and we broke down due diligence into six categories. Today’s post will highlight the key legal issues the purchaser should be aware of when purchasing a business.
Reviewing the Owner’s Governing Documents
Prior to any acquisition, the purchaser will need to know the basic organizational structure of the business, i.e. how it was formed, its governing documents, and its key personnel. Knowing how the business is organized will dictate how the transaction… Read the rest
For the purpose of this series, we’ll refer to the party selling the company as the owner, and the party acquiring the company as the purchaser. If you read about these transactions in other blogs or articles you might find the selling party referred to as the target company and the acquiring party as the acquirer.
In the preliminary stages of the purchase and sale of a business there are a few primary concerns: (1) the owner wants to make sure that the potential purchaser is serious, (2) the… Read the rest
It’s important to keep up-to-date on state and local regulations that govern the purchase and sale of goods within Washington state, including which sales taxes may affect your business. Washington no longer uses resale certificates; instead, it requires every business that sells goods at wholesale to apply for a reseller permit to present to vendors. Reseller permits allow you to purchase goods (or services) that you intend to resell without having to pay retail sales tax on the original purchase. If you run a business that purchases items that you are intending to resell, you… Read the rest
Apple Proposes to Pay Google $1 per iPhone
Motorola Mobility, a wholly-owned subsidiary of Google, and Apple have been engaged in a messy dispute over patent rights. On Wednesday, Apple formally announced to the court its willingness to pay Motorola for a license to use its standard-essential wireless patents, but only if the per-unit royalty rate does not exceed $1.
Apple declared that if the court sets the FRAND (fair, reasonable, and non-discriminatory) rate at or below $1, then it will take a license and start paying right away. If the… Read the rest
Happy Halloween to all our readers!
Earlier this month, we wrote about the dangers of material omissions in private placement offerings. Basically, if you’re selling stock in your company, you need to disclose all information necessary for an investor to make an informed decision. For example, if you forget to mention that your company is about to lose half its customer base, your investors can sue for rescission, allowing them to get all their money back plus interest.
How do you make sure that you don’t forget to disclose important information to your… Read the rest
Consumer advocacy group urges SEC to reconsider rules lifting ban on general solicitation
Consumer Federation of America submitted a comment letter to the SEC expressing its, “strong opposition to the Commission’s proposed rule to lift the ban on general solicitation and advertising in private offerings.” On August 29th, the SEC issued proposed rules which would implement Title II of the JOBS Act, allowing companies issuing securities pursuant to Rule 506 to utilize general solicitation under certain conditions. The Consumer Federation of America identified a number of substantive and procedural concerns, including:
- That the standard for “reasonable
Mergers and Acquisitions
Yahoo and Alibaba Close Deal
Yahoo has agreed to sell back half of its interest in the Chinese Internet company Alibaba. In 2005 Yahoo acquired a 40% interest in the company, but since then relations between the two companies have become strained, especially as Yahoo failed to meet investors’ expectations. As part of an agreement reached earlier this year, Yahoo will sell another 10% of its Alibaba holdings back to the company when the company files an IPO, and the rest of its Alibaba holdings after the IPO. Yahoo’s remaining interest in Alibaba is valued at… Read the rest
SEC Issues Proposed Rules to Implement Title II of the JOBS Act
Last Wednesday the SEC submitted for comment proposed rules to implement Title II of the JOBS Act, which would remove the prohibition on general solicitation for certain private placement offerings.
- The current 506 exemption will remain in place, and 506(c) will provide for the new rule, which lifts the ban on general solicitation.
- The SEC is proposing a flexible “facts and circumstances” test to
SEC Pushes Back Proposed JOBS Act Rules, Again
Last week we wrote about how the SEC was opting to issue proposed rules for Title II of the JOBS Act at its August 22nd meeting, rather than implementing interim rules, as had been anticipated. But on August 21st, just a day before the proposed rules were set to be unveiled, the SEC issued a notice that the rules would not be proposed until August 29th. We’ll update update… Read the rest
Mergers & Acquisitions
Google to Acquire Frommer’s Travel Guides
Google is acquiring Frommer’s travel guides brand in a reported $23 million deal. $23 million is a drop in the bucket for Google, but the acquisition is an important indicator of the company’s somewhat controversial intent to dip further into the content business. Consumer Watchdog is calling for federal regulators to block the acquisition on antitrust grounds, alleging that Google favors companies it owns in organic search results.
The Alberleen Group–A New Type of Incubator
… Read the rest