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            This blog is about business corporations.  In my practice, however, I also do work with not-for-profit corporations.  I recently worked on a merger of two not-for- profits.  Since I found a number of unusual issues in this transaction, I thought it might be helpful if I set forth the steps and attached forms of the plan of merger and directors’ resolution adopting the plan.

            Merging Massachusetts not-for-profit corporations can be a little different in a couple of respects.  In Massachusetts, Chapter 180 of the general laws governs not-for-profit corporations.   The corporate law revision in 2004, which adopted a new business corporation statute, however, did not address the plethora of specific acts covering particular types of corporations, such as those governing insurance companies, many types of banking corporations, and yes, not-for-profit corporations.  Chapter 180, which few operative provisions, makes applicable many provisions, not of the current corporate statute, but of the prior corporate statute, Chapter 156B to govern the corporation’s workings. One must therefore use care as Chapter 156B and current statute often conflict. 

            To effect a merger, Chapter 180 requires a vote of at least 2/3 of the members.  One will, however, encounter many not-for-profits without members.  How then to deal with the requirement of member adoption?  As described below, Chapter 180 has a “fix” for this.

            I will go through the steps necessary to merge two “memberless” Chapter 180 corporations.  I will thereafter set forth the necessary forms I have used.

FIRST:  Although It is not necessary or required by statute or regulation, as a courtesy and because the Attorney General has jurisdiction over “public charities,” it is wise to notify the Attorney General ((617) 727-2200 x 2101) of the upcoming  merger.  This will turn up any issues the Attorney General may have with respect to the merger.

SECOND:  One should check with the corporate records of each of the corporations to discover whether consents or notifications are required (or maybe prohibitions to the transaction appear) under any of the corporation’s licenses, leases, contracts or the like as a result or the merger.  

THIRD: An “Agreement of Merger” should be drafted.  Section 10 (b) of Chapter 180 requires that the agreement contain:

  1. the names of the corporations merging and the survivor thereof, or the name of the resulting corporation,[1]
  2. the purposes of the survivor or resulting corporation,
  3. the terms of the transaction,
  4. The manner of fixing the effective date of the transaction, and
  5. other provisions which could have been included in the articles of organization or other provisions deemed necessary.

Note that if one of the merging corporations is a “public charity,” the surviving corporation must be a “public charity.”

FOURTH: Directors authorize an “Agreement of Merger.” [2] With respect to authorization, M. G. L. c. 180, § 10 (b) requires that the Agreement of Merger must be signed by an “authorized” officer.  Typically, in a business or not-for-profit corporation, the directors authorize an officer to sign on behalf of the corporation.  I therefore recommend that the board of directors authorize the signing officer, though this is not explicit in the statute.

FIFTH:   Chapter 180 requires that the Agreement of Merger be adopted by a 2/3 vote of all members.[3]   As mentioned above, many not-for-profit corporations do not have members and in such a case, the statute allows that the board of directors may adopt the agreement by the same percentage vote as would otherwise have been required by the members (at least 2/3) if the not-for-profit corporation had members.  This can (and should) be done in the same meeting as the authorization in 4 above.

SIXTH:  Articles of Merger are filed with the Corporations Division of the Secretary of State.

SEVENTH:  The survivor files a certified copy of the articles of merger on each registry where any real estate is located, but need not file if the survivor owned that property.

FINALLY: The Attorney General’s website requires a copy of the articles within 30 days of the filing.  I would file a copy certified by the Secretary of State.

FORMS

VOTE OF DIRECTORS

VOTED:           That the board of directors hereby adopts the Plan and Agreement of Merger of YYYYYY, Inc. with and into XXXXXX, Inc. (“Agreement”) substantially in the form attached hereto, and further

VOTED:           To authorize, ratify and confirm the execution and delivery of the Agreement on behalf of the Corporation by the president, and further 

VOTED:           To ratify and confirm all that each of the officers of the Corporation has done in connection with the Agreement and the transactions contemplated thereby, and further

VOTED:           To approve and adopt, pursuant to M. G. L. c. 180, § 3, the Agreement and the merger (“Merger”) contemplated by the Agreement, there being no members of the Corporation, and further

VOTED:           That the officers of the Corporation are authorized to execute, deliver and file all such other documents and other instruments as any of them deems necessary, proper or convenient to carry out the transactions contemplated by the Agreement and the Merger and take such further action as any of such officers deems necessary proper or appropriate to effectuate the foregoing.

PLAN AND AGREEMENT OF MERGER

PLAN AND AGREEMENT OF MERGER OF XXXXXX, INC. WITH AND INTO YYYYYY, INC.

            AGREEMENT (“Agreement”) entered into as of ______________, 2020 by XXXXXX, Inc. (“XX”) and YYYYYY, Inc. (“YY”).

            WHEREAS, XX is a corporation formed under M. G. L. c. 180 and having its principal office at ______________________, Blackacre, MA 00000, and

            WHEREAS, YY is a corporation formed under M. G. L. c. 180 and having its principal office at _______________________, Whiteacre, MA 00000, and

            WHEREAS, Section 10 of Chapter 180 of the General Laws of The Commonwealth of Massachusetts permits a merger of any two or more corporations organized under said Chapter 180, and 

            WHEREAS, YY and XX deem it advisable and to the advantage, welfare and best interests of each of said corporations, subject to the authorization, approval and adoption of, this Agreement, by the directors of each, to merge XX with and into YY, pursuant to M. G. L. c. 180,  § 10, upon the terms herein set forth; and

            WHEREAS, Since neither YY nor XX have members, M. G. L. c. 180, § 3 permits any member action, including adoption and approval of this Agreement, to be taken by directors by action of the same percentage of directors of each of YY and XX.

            NOW, THEREFORE, in consideration of the premises and of the mutual agreements and promises of the parties, the undersigned corporations hereby enter into and adopt this Agreement, as follows:

            1.         Pursuant to the provisions of M. G. L. c. 180,  § 10, XX, as the terminating corporation, shall be merged with and into YY, and YY shall be the surviving corporation.  The separate existence of XX shall cease as of the effective date, in accordance with M. G. L. c. 180,  § 10.  The name of “YYYYYY, Inc.” shall remain unchanged after said effective date. 

            2.         The articles of organization of YY, as the same shall be in force and effect as at the effective date of the merger herein provided for, shall continue to be the articles of organization of said surviving corporation, until the same may be amended pursuant to the provisions of M. G. L. c. 180.

            3.         The by-laws of YY, as the same shall be in force and effect as at the effective date of the merger herein provided for, shall continue  to be the by-laws of said surviving corporation, until the same may be amended pursuant to the provisions of M. G. L. c. 180.

            4.         In accordance with the existing articles of organization of YY, unless and until subsequently amended, the purposes of YY shall remain as follows:

To organize a corporation under the provisions of Massachusetts General Laws 180, Section 4(a), __________

______________________________________________________________;  and any and all other purposes authorized under the Massachusetts General Laws Chapter 180; and shall operate as a Federally designated tax exempt organization under the provisions of Section 501 (c) (3) of the United States Internal Revenue Code.

            5.         YY and XX each agree that they shall execute, file and/or record Articles of Merger any other document or documents required by The Commonwealth of Massachusetts and each shall perform all necessary acts within The Commonwealth of Massachusetts and elsewhere in order to effectuate the merger herein contemplated.

            6.         The terms and conditions of the merger are that on the effective date of the merger XX shall be merged with and into YY and that thereafter XX’s independent existence shall cease.

            7.         The president, clerk and each other officer of YY and XX are each individually hereby authorized, empowered and directed to make, execute, deliver, file and record any and all instruments, papers and documents which shall be or become necessary, proper or convenient to carry out or effect any of the provisions of this Agreement or the merger hereby contemplated.

            8.         The effective date on which the merger herein shall become effective shall be the date the Articles of Merger are filed with the Secretary of The Commonwealth of Massachusetts.

            IN WITNESS WHEREOF, this Agreement is hereby signed, on behalf of the constituent corporations, by an authorized officer thereof.

XXXXXX, INC.

By_____________________________________

   ______________, president, 

    duly authorized

YYYYYY, INC.

By_____________________________________

   _____________, president, 

    duly authorized


[1]. Note that M. G. L. c. 180, § 10 permits the constituent corporations to consolidate as well as merge.  A consolidation is the combination of the constituent corporations into a new corporation—the “resulting” corporation.  A consolidation is no longer permitted in a business corporation governed by M. G. L. c. 156D.

[2]  Or for a consolidation, an agreement of consolidation, of course describing a resulting corporation rather than the survivor.

[3]  The statute is poorly written and should read “the vote of at least 2/3 of the members.”  The drafters did not intend to require a vote of exactly 2/3 of the members but a minimum vote of 2/3 for adoption.

(Now’s the time to update the Investor Questionnaire, if you haven’t already.)

            The Securities and Exchange Commission adopted amendments “to more effectively identify institutional and individual investors that have the knowledge and expertise to participate in private capital markets.”  The amendments were adopted on August 26, 2020 and became effective on December 8, 2020.  The following discusses the expansion of the term “accredited investor” as it applies to individuals.

            Prior to the amendment, the criteria for determining which individuals could be considered accredited investors focused solely on the net worth or income of those persons or in some cases, their spouses.  The amendments expand the list to include the holders of certain professional designations and others, without regard to their net worth or income.

1.  Individuals holding any of the following designations, in good standing.

            a.         Licensed General Securities Representative (Series 7).

            b.         Licensed Investment Adviser Representative (Series 65)

            c.          Licensed Private Securities Offering Representative (Series 82).

            Note that the rule requires that the individuals must be in “good standing” to be accredited investors.  With respect to “good standing,” the SEC gives the example, “a person seeking accredited investor status by passing the Series 65 exam would also need to be licensed as an investment adviser representative in her state and would need to comply with all state-specific licensing requirements (e. g. paying dues, etc.).”

2.         Individuals who are “knowledgeable employees” of certain private fund issuers (i. e. some hedge funds or private equity funds) may invest in that fund.  A “Private fund issuer” is an issuer that would be an Investment Company, but for an exclusion in either § 3(c) (1) or § 3(c) (7) of the Investment Company Act.   “Knowledgeable employees” are defined in SEC Rule 3c-5 (a) (4) of the Investment Company Act and include directors and officers of the private fund and certain employees.   The SEC cautions the individual “qualifying as an accredited investor based on her status as a knowledgeable employee is an accredited investor only for offerings by the private fund and other private funds managed by their employer.  She cannot use her status as a knowledgeable employee to  qualify as an accredited investor in other offerings.”

3. An individual may qualify as an accredited investor based upon the individual’s status as a family client of a family office. 

            The individual investor must:

a.         Come within the definition of “family client” in Rule 202 (a) (11) (G)-1 under the Investment Advisers Act,

b.         Be a “family client” of a family office that itself qualifies as an accredited investor, and

c.          Have that investment be directed “by a person who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the projected investment.

            In addition to the foregoing the SEC modernized the definition or spouse for 

the purpose of computing joint net worth or income test when making a determination of accredited investor.  The new Rule adds “or spousal equivalent” to the term spouse in the Rule.  Spousal equivalent is defined as “a cohabitant occupying a relationship equivalent to that of a spouse.

In the 2020 case, NTV Management, Inc. v. Lightship Global Ventures, LLC,[1]  the Massachusetts Supreme Judicial Court dealt with a financial intermediary (“NTV”) that entered into an agreement with a client (“Client”) to “source capital and structure financing transactions from agreed upon target investors and/or lenders.”  NTV expected “to introduce [to the Client] and facilitate investment from third party sources . . .to finance all level of the transactions (i. e. both equity and debt).”  If  NTV “sourced capital,” it would reap a success fee.  NTV, in fact, did not “source capital” for the Client, but sued the Client for, among other things, collection of an advisory fee under the contract.  A jury found for NTV, but the trial judge vacated the verdict and found for the Client, because NTV had not registered as a “broker” under the federal Securities Exchange Act  or as a “broker-dealer” under the Massachusetts securities’ law, thus rendering, under both statutes, the contract void and unenforceable.

The Supreme Judicial Court reversed and found the contract enforceable.  It agreed that both the state and federal securities laws make it unlawful for any person to transact business as a broker-dealer unless registered and that contracts in violation thereof were unenforceable.  The Court then defined a broker-dealer as one who “effects” transactions in “securities.”  The Court did not focus on the business of NTV but on the contract between NTV and the Client.  The Court held that two issues determine whether a contract requires registration.  First, does the contract require that the transactions “effected” be in securities?  Next, does the contract require a person to “effect” such transaction?  The Court did not consider the second issue  because it held that the contract “on its face, did not require NTV to ‘effect’ transactions in ‘securities’” because the financing contemplated by the contract could have been effected with transactions other than securities. The Court distinguished a 10 year old Appeals Court decision[2] and also observed an “evolution” of  “bespoke” financial transactions at the federal level, noting, with apparent approval, M & A Brokers,[3] a 2014 SEC no action letter that stated that, if certain steps were taken, the SEC would not recommend enforcement action against business brokers who may engage in an occasional stock sale.

There are several take-aways from this case.

  1. One question relates to the scope of the decision.  The case involved a contract between NTV and its Client which involved an advisory fee not to the success fee contemplated which may have involved a “security.”  What would have happened if NTV was successful in placing a “security” and was due a success fee  and sued, not for the advisory fee, but for the success fee?  I would guess that the a Massachusetts court would uphold the contract, following Justice Lenk’s rationale, and focus on the contract (and not the intermediary’s business) assuming the same contractual provisions as in NTV’s contract.
  2. The case involved a state court construing a state and a federal statute. Would a federal court construe the federal statute in the same way as Justice Lenk?  Would another state court in another jurisdiction?
  3. A business-broker is in an analogous position with NTV, only it may be dealing with “securities” in the context of an acquisition involving a sale of stock to the buyer. With the Court’s favorable reference to M & A Brokers, it is likely that a Massachusetts court would apply its ruling to a business broker’s contract for fees.   Must the contract have language consistent with NTV’s contract with the Client? (See fn. 3)
  4. The M & A Brokers no action letter, like all no action letters does not state the SEC’s position but rather states, “without necessarily agreeing with [the requester’s] analysis [the SEC] would not recommend enforcement action” on a set of facts. The M & A Brokers no action letter, however, addresses the general situation of the business broker and would appear to have greater application than the typical no action letter addressed to a specific set of facts and for a particular client.
  5. The M & A Brokers letter notes therein, that to avoid SEC enforcement action when avoiding registration, 10 specific requirements were set forth.  In my practice, I have noted some apparent non-compliance with those requirements, at or in connection with the closing of a stock purchase acquisition, probably through oversight.  I would urge financial intermediaries or investment bankers/business brokers to review their practices in light of NTV’s contract and M & A Brokers.
  6. The Massachusetts securities’ act makes it “unlawful for any person to transact business . . .as a broker-dealer . . .unless. . . registered.”  (emphasis supplied). The federal act has a similar provision.   The Court’s focus on the contract involved rather than the business of NTV leaves open the possibility (however remote) that an intermediary in NTV’s position (or less likely a business broker) could result, depending on the business of the intermediary, in liability for a violation under both statutes, even though a contract with a client might be enforceable.

Conclusion

            Although the NTV and M & A Brokers case appears to go a long way toward permitting financial intermediaries or investment bankers/business brokers avoid the pain of registration, there are still risks.  These risks arise from non-compliance with NTV and M & A Brokers, and also because there may be instances where the SEC or a court may not apply the rationale of NTV and M & A Brokers.

[1]                 484 Mass. 235 (2020).

[2]                 I was a little puzzled why Justice Lenk did not overrule or decline to follow her earlier decision, as an Appeals Court Justice, in Indus Partners, LLC v. Intelligroup, Inc., 77 Mass. App. Ct. 793 (2010).  With respect to NTV’s contract, she stated that “it is undisputed that the contract [in Indus] required a transaction in securities.  .  .”  NTV Management, Inc. v. Lightship Global Ventures, Inc.,  494 Mass at 448.   The contract in Indus does not require a transaction in securities but in fact states:

“The Agreement provided in relevant part that Indus was to consult with and advise Intelligroup regarding “a possible Transaction … involving [Intelligroup] and any other party.” “Transaction” was defined to include, among other things, the “sale or other transfer, directly or indirectly, of all or any portion of the assets or securities, (whether outstanding or newly issued) of [Intelligroup].”Indus Partners, LLC v. Intelligroup, Inc., 77 Mass. App. Ct. 793, 794, fn,1. (Emphasis supplied)

Clarification would have been helpful to business brokers and like intermediaries in drafting engagement letters.

[3]                 SEC No Action Letter M & A Brokers, January 31, 2014, revised February 4, 2014.

I am returning to my long neglected blog and starting a series about legal issues encountered in forming a new business.

I will start with a post about concerns the founder of a new business should have before leaving his or her job and continue posts through one about the financing of the new business. I will place emphasis on formation of a technology driven start up.

What then are the issues the new company’s founder must consider prior to quitting his or her job?

  1. The founder, no doubt, had to sign or became subject to a number of agreements with his or her current employer. These agreements may be contained in a single contract, separate contracts or in an “employee handbook.”  Wherever contained, they must be carefully reviewed.
  2. Non Disclosure Agreements—NDAs. The founder probably signed a non disclosure agreement with the employer.  Such agreements generally prohibit the use or disclosure of the employer’s confidential information.  The founder must be careful not to have even the appearance of appropriating confidential information because, if in fact there is evidence of misappropriation, litigation by the employer can move to quickly shut down the new enterprise.  NDAs take various forms.  In certain agreements, making a determination as to what, in fact, is confidential information may be difficult.
  3. Misappropriation of Trade Secrets. Wholly apart from the foregoing agreements, the employer may get injunctive relief and/or damages for “misappropriation of trade secrets.”   To prevail, the employer must show that there is in fact a trade secret, that the employer took reasonable steps to preserve it and that the employee used improper means in breach of a confidential relationship to get and/or use the trade secret.  In addition, there may be criminal prosecution for the misappropriation of trade secrets.
  4. Non-Competition Agreements. Many employment agreements contain non-competition agreements. Non-competition agreements are currentlyenforceable if they are necessary to protect the “legitimate business interests” of the employer and if they are reasonable in geographic scope and in time of enforcement.  Courts have held that non-competition agreements that were designed simply to protect the employer from ordinary competition did not serve the aforesaid “legitimate business purpose,” and are thus unenforceable.  I say these agreements are now “currently enforceable” because there is pending legislation to drastically curtail the effect of non competition agreements.  Attempts, however, by the Massachusetts legislature to limit the scope of non competition agreements[1]have met with no success (see my posts of August 2, 2016, June 15, 2015, September 14, 2013 and December 14, 2011, which discuss the merits of some of those proposals). In the event the founder is subject to a non competition agreement, he or she must carefully analyze the agreement to determine whether the founder and the new business are subject to its prohibitions and, if so, whether the employer can enforce the agreement.
  5. Non Solicitation Agreements. The founder may also be subject to agreements preventing solicitation of customers, vendors or employees, etc. of the employer.  Care must be taken to avoid running afoul of these agreements when staffing or ramping up a new business.
  6. Assignment of Invention Agreements. Many employment agreements contain a provision requiring assignment to the employer of know how and inventions.  Some of these agreements may even provide that employees must disclose futureinventions developed for a certain time after termination of employment.  Any know how, invention or process, etc. to be used in the new business should be carefully examined by an IP lawyer to determine whether such an agreement will be breached.  This will be crucial to the success of future funding of the business because ownership and protection of the new company’s intellectual property will be carefully scrutinized by any funding source.
  7. Prohibition of Outside Activities Agreements.Certain agreements prohibit work on outside business activities during business hours, or prohibit outside activities, period.   If it is determined that such an agreement is effective, the founder must find a way to deal with this prohibition.  Even if no such agreement exists, the founder should be careful.  Work should be undertaken on a new business while in the employ of another only after seeking the advice of an attorney.
  8. Other Restrictive Agreements. Employers are creative when attempting to protect confidential information and trade secrets and, of course, when attempting to stifle competition.   The types of devices are limitless and an employer’s otherwise innocuous clause or agreement may give rise to serious consequences in the new enterprise.  Care and thoroughness pay off here.
  9. Many employment agreements require return of the employer’s property. Prior to the founder’s exit he or she should carefully examine files, plans, equipment, hard drives and other retention devices for the employer’s property.  Even an inadvertent retention, if discovered (and it will be!), may result to the founder’s detriment in a law suit by the former employer.
  10. Finally, on exit from the employer, the exit or severance documents should be carefully looked at to make sure that the employer did not add additional agreements that might affect the founder’s new business. A severance payment, for example, may be linked to a non competition or non solicitation agreement.  Prior to leaving, the founder of the new business should also attempt to maximize his or her benefits, such as vacation time, sick time, stock options and the like.

Plan carefully your exit.

 

[1]          The current bill couples the limitation on the scope of non competition agreements with the Uniform Trade Secrets Act.

In Baker v. Wilmer Cutler Pickering Hale and Dorr LLP,[1] the Massachusetts Appeals Court held that an attorney for a limited liability company owed a fiduciary duty to its minority members. I believe it’s clear that this ruling would apply to corporations and its shareholders

In Schaefer v. Cohen, Rosenthal, Price, Mirkin, Jennings & Berg, P. C[2]. the Supreme Judicial Court, in dictum, stated that there could be a duty of corporate counsel to the minority shareholders.   The Court stated:

[T]here is logic in the proposition that, even though counsel for a closely held corporation does not by virtue of that relationship alone have an attorney-client relationship with the individual shareholders, counsel nevertheless owes each shareholder a fiduciary duty . . . Just as an attorney for a partnership owes a fiduciary duty to each partner, it is fairly arguable that an attorney for a close corporation owes a fiduciary duty to the individual shareholders.

In Baker, the Appeals Court adopted this rationale and stated whether such a fiduciary relationship to, in the case of individual members of a limited liability company, exists, is “largely a question of fact.” Reversing the granting of a motion to dismiss, the Appeals Court found that when the majority members secretly retained the attorneys to represent the company, then the attorneys worked to assist the majority to extinguish rights of the minority, a claim against the attorneys could exist. The Court held that the complaint stated a claim for the attorneys’ breach of fiduciary duty, as well as a claim for aiding and abetting such breach, conspiracy and violation of M. G. L. c. 93A.

As a practical matter this case may prove troubling for lawyers who represent close corporations and who assist in action at the request of the controlling person or group. While the facts in that case are more than somewhat extreme and the case was positioned upon a motion to dismiss, until some flesh is put on the bones of this case, the lawyer acts at his or her peril. The ruling is salutary, however, and a real benefit to improving corporate governance.

I represent primarily close corporations. I tell its shareholders that I represent the company and that when I believe that a shareholder has an interest adverse to another, I explicitly note the conflict and suggest that the adversely affected shareholder obtain counsel.   This has always been good practice and the Baker decision will only cause me to put the foregoing in writing.   I will also be more insistent on requesting potentially adversely affected shareholders to retain separate counsel.

[1]           91 Mass. App. Ct. 835 (2017).

[2]           405 Mass. 506, 541 N. E. 2d 997 (1989).

Mass. Gen. Laws c. 149, §148 provides that a discharged employee must be paid “in full” his or her wages on the date of discharge. That section also provides that the term “wages” includes “any holiday or vacation payments due an employee under an oral or written agreement.” Thus an employer must pay for accrued vacation time on the date of discharge, along with all other wages earned to that date.  So, if you do not have a clear policy as to how vacation accrues, how much vacation pay do you give an employee on that date? What if you have no defined policy—you merely tell the employee he or she has, say, two weeks vacation?

In the event of no defined policy (which is usually the result of an oversight), I have always counseled the practice of giving the entire year’s vacation time (less any time taken) pay on discharge.   A client of mine wanted a detailed memo about discharge policy and, while researching the subject, I came across the following advisory.   The Massachusetts Attorney General’s Advisory 99/1 Vacation Policies states:

             “Employers can protect themselves by adopting clear and unambiguous vacation                    policies . . .A policy that provides for employees to earn a given amount of vacation “a year, “ “per year” . . . is not clear. Where an employer’s policy is ambiguous, the actual time earned by the employee will be pro-rated according to the time period . . . in which the employee actually works. For example, if an employee is to receive twelve vacation days “in a year,” and the employee voluntarily or involuntarily terminates his or her employment after ten months, the employee would be entitled to ten vacation days or one day per month worked. Discharge prior to one year without pro rata payment constitutes failure to pay wages earned under Section 148.” (emphasis mine)

            Does the above mean that vacation pay may be apportioned if no policy is stated? One employment lawyer with whom I spoke and a person at the Attorney General’s office suggested that the pro ration in the AG’s Vacation Policy above only applied if the employer’s policy was ambiguous.   There is a difference between an ambiguous policy and no stated policy. The thinking was that “no accrual policy” was not ambiguous—it was clear; the entire vacation time accrues at the beginning of the year.

If you want to pro rate vacation pay on discharge, make your vacation policy known (post it or include it in a manual or in a hiring letter) and clear.

.

To the Editors:

I have been a subscriber of The New York Times off and on for 50 years; a reader for longer.   Though The Times was editorially leftish, I particularly appreciated its independent journalism.   Sadly, those days have passed and the opinion pages appear on page one and the editorial and op ed. pages literally scream with political favoritism for Mrs. Clinton. As a supporter of Sen. Sanders I wrote, a couple of months ago, regarding an article appearing on page 1 but which I believed belonged on the editorial or op-ed page. The “news” article supported Mrs. Clinton and misrepresented Sen. Sanders’s positions. I was disappointed in the paper and made my feelings known (my letter was not printed).

As a progressive, I cannot support Mr. Trump. Recently, The Times, in both of its news and op ed. pieces has taken to misquoting Mr. Trump, in an apparent effort to favor Mrs. Clinton. I find this offensive. One would hope that a well-informed citizenry could make up its mind as to Mr. Trump’s or Mrs. Clinton’s qualifications without a “push” from what purports to be the newspaper of record.

The Times has reached a new low; it had been my paper of record but is no longer. Perhaps in the days of on line journalism, it can’t afford first-rate reporters or editors (or for that matter, in its on line versions, spell and grammar checkers).

I’m disappointed.

Please cancel my subscription.

Respectfully,

Edmund Polubinski, Jr.

Boston, Massachusetts

The Massachusetts legislature ended its session without taking action on competing bills limiting non competition agreements in the House and Senate.   This is probably a good thing because the discussion regarding the bills has not been substantive. The venture capital industry supporting a limitation and the business community opposing the limitation have both resorted to specious arguments.   I discuss the pros and cons of eliminating or limiting non competes in my posts of June 25, 2015 and September 14, 2013 below.

I have had very few clients involved in family businesses, which businesses have succeeded to the second generation.  Some of my clients have been children who have been “frozen out” of the business by their siblings, sometimes to the dismay of the founder.  Sometimes the second generation hasn’t a clue to how the business is run.

The owners of a successful business should begin at least 10 years before they plan to turn over the reins, to implement a realistic plan for succession.  By realistic I do not mean including, in future management, the child still in kindergarten or believing, that the child who is successful educator, will suddenly see the light, and join the business.  It may be that the best course is sale of the business, insuring a safe retirement and perhaps a cash gift to the second generation.

There are some interesting stories at Lifting the Second-Generation Curse.  You can find a link to that article which appeared in The New York Times at my Twitter account @EdPolubinski

Crowdfunding was authorized by the JOBS Act enacted on April 5, 2012. The SEC adopted regulations implementing the crowdfunding portions of the Act on October 30, 2015, and those regulations became effective on May 16, 2016. The release adopting the regulations was 685 pages long but the rules adopted are not all that complicated. The following is a brief and general discussion of those regulations.

Crowdfunding will be of use to issuers who want to raise smaller amounts of capital (up to $1 Million in any 12 month period).

An individual’s investment in any 12 month period in all crowdfunding issuers is limited to:

(i) The greater of $2,000 or 5 % of the lesser of the investor’s annual income or net worth if either the investor’s annual income or net worth is less than $100,000; or

(ii) 10 % of the lesser of the investor’s annual income or net worth, not to exceed an amount sold of $100,000, if both the investor’s annual income and net worth are equal to or more than $100,000.

During any 12 month period, the aggregate amount of securities sold to an investor through all crowdfunding offerings may not exceed $100,000.

Certain companies are excluded from participating in in raising funds by crowdfunding,

Generally, securities purchased in a crowdfunding offer may not be resold for a period of one year.

The issuer must make disclosure about the business, use of proceeds, etc. similar to that which an issuer must make under Regulation D.   This is something that the company should not try at home; this disclosure is difficult and precise work. Disclosures of this sort have followed a pattern and it would be wise to follow that pattern.   The disclosures are an “insurance policy.”

The standard for financial statements depends upon the amount of the offering.

There are filing requirements and ongoing reporting requirements. Advertising is restricted.

Finally, the crowdfunding must be conducted exclusively through an SEC registered intermediary—either a SEC registered broker—dealer or a “portal.”   If you call, I can give you the names of several “portals.”