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When conducting mergers and acquisitions, companies should be aware of the many rights and responsibilities that accompany these processes. This is particularly important when it comes to tax liabilities. Although many people use the terms “mergers” and “acquisitions” interchangeably, the two terms have different meanings. A merger occurs when two or more companies combine to form a single, new business, termed the “survivor” corporation or business. After a merger occurs, …

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The Benefits of Initial Public Offerings

When a corporation needs to raise a large amount of capital, an initial public offering can be a wise course of action.  To conduct an initial public offering, a corporation’s shares are made available for purchase to the general public. Doing so provides the company with a substantial influx of cash and the opportunity to grow the business.  This term applies only to the first of such offerings, and any …

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An accredited investor is an individual or a financial entity that has been recognized by the Securities and Exchange Commission as being sophisticated enough to handle large investments.  Under Regulation D, investors who are financially sophisticated may have a reduced need for the protection provided by certain government filings.  Rule 501 of Regulation D clearly defines an accredited investor as any one of the following: A bank or savings and …

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Finders…Beware

A Finder by any other name would smell…like a Finder.  With all due respect to William Shakespeare, the SEC, in a recent no action letter, once again confirmed its longstanding position that regardless of how you dress it up, a “finder” receiving fee-based compensation for introducing investors would be required to register as a broker-dealer. Brumberg, Mackey & Wall, P.L.C, a law firm in Virginia, requested assurance that the Staff …

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When deciding whether to use employees or independent contractors, companies often consider cost as a deciding factor. Choosing to use independent contractors over employees appears to be a good choice, as it can decrease certain expenses, such as workers’ compensation insurance, payroll taxes, overtime pay, and minimum wage obligations. While this may be a viable option for many employers, companies should be careful, as both federal and state laws regulate …

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Hostile Takeovers

Companies that combine, sell, and buy businesses use two different strategies to achieve their goals: mergers and acquisitions. While many mergers and acquisitions are harmonious, sometimes companies experience hostile takeovers, defined as those that occur without the consent of the target company. That is, an acquirer takes control of the company by purchasing its shares without the knowledge of its management. This type of action is often regarded as an …

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Breach of Fiduciary Duty

The term “fiduciary” is meant to include those persons who have legal responsibility for managing someone else’s money. Common fiduciaries are trustees of private trusts, investment advisors, and investment committees of retirement plans. A fiduciary must always act in the best interest of the person for whom he has fiduciary responsibility. This means that he must not act in any way that is contrary to the interest of the client …

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SEC v. Goldman Sachs – Lessons to be learned?

The SEC, in a move that has stunned some of even its harshest critics, has brought an action against Goldman Sachs based on securities fraud in connection with the sale of synthetic collateralized debt obligations.  A copy of the complaint may be found at www.sec.gov/litigation/complaints/2010/comp-pr2010-59.pdf. While many cynics could not resist commenting on the timing of this lawsuit given the significant financial industry reform bills pending before Congress, while others …

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          I recently attended a two day Regulation D conference sponsored by the American Bar Association.   The Panel consisted of current and former SEC, FINRA and blue sky regulators, sharing their thoughts on the latest trends in private placements and Regulation D offerings.   The following are various topics discussed during the seminar.           SEC Proposed Amendment to Regulation D           In December 2006, the SEC proposed significant changes to Regulation …

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On February 28, the SEC expanded its rules regarding executive compensation and corporate governance. These changes could have profound implications for companies of all sizes. The amendments represent the SEC’s efforts to increase investor awareness of companies’ executive compensation practices and a desire to provide shareholders with a greater voice in their companies. The amendments include the following provisions: If a company’s compensation policies and practices are “reasonably likely to …

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