San Jose Business Lawyers Blog

Articles Posted in Corporations

There are pros and cons to including an arbitration clause as part of your contractual agreements. Arbitration is a popular and can be effective forum for settling disputes between individuals, businesses, in real estate contracts and in employment settings under the right circumstances. There are two types or arbitration clauses:  non-binding and binding.

 

Non-Binding Arbitration

In non-binding arbitration, the arbitrator makes a decision to determine which party is liable and then suggests possible compensation for damages. Neither party is obligated to follow through with these guidelines.

Binding Arbitration

Binding arbitration is the opposite. The decision-maker hands down a ruling of liability and also assigns penalties. An arbitration clause can be binding in most contracts but California allows for the clause to be ignored if all parties agree to the change. Here are the advantages and disadvantages of having an arbitration clause.

3 Pros of Having an Arbitration Clause

  1. Saves Money

Arbitration is usually much cheaper than going to court and may be a viable option to save money. If the dispute continues to litigation, costly fees associated with depositions, uncovering evidence and pre-trial meetings follow.

  1. Speed of Decision

A case in litigation can take many months or years to conclude while having an arbitration clause may resolve the dispute much faster, usually averaging 475 days.  Arbitration has more relaxed rules of pleading and evidence in comparison to litigation rules.

  1. Confidentiality

Arbitrations can be held in private are subject to rules concerning confidentiality, so the parties that especially prize privacy are not exposed to public scrutiny.  Despite the fact that proceedings may be transcribed, arbitrations have no “public record.”

3 Cons of Having an Arbitration Clause

  1. Only One Decision-Maker

While litigation usually leaves the final decision to a panel of jurors, arbitration has only one arbitrator (who can be hand-picked) who passes down a decision of liability. Without an impartial jury vote, your case may be treated unfairly or receive a fraction of the required attention.  There is rarely a right to appeal if a mistake is made.  Further, arbitrators can make decisions on what they perceive to be fair, rather than what the law directs.

  1. Can Become Costly

The process of discovery is becoming more prevalent in arbitration, which not only lengthens the time of arbitration, but also the cost.   Unlike traditional court proceedings, wherein judges are compensated by the state, parties to an arbitration must pay the arbitrators out of their own pockets.  Many arbitrators charge hundreds of dollars per hour.

  1. Possibility of Unnecessary Claims

Arbitration may be taken less seriously than a lawsuit in court so some parties may treat it more like mediation. Necessary or frivolous disputes may not be weeded out through procedural processes normally applicable in court.

Having an arbitration clause can save time and money, but it may also be biased or lack the necessary procedural filters of litigation. An experienced attorney can help you navigate the legal system and determine if this is the right choice for you.

About Structure Law Group, LLP

Structure Law Group is a San Jose based law firm that serves its clients’ business, employment and real estate needs, including but not limited to business formations, debt and equity investments, employment agreements, commercial leasing and purchases, commercial contracts and related litigation.

The possibility of a hostile takeover is a very real concern for many publicly traded companies. A hostile takeover can occur in a number of ways, but one of the most common is purchasing enough stock on the open market to obtain a controlling majority. The main characteristic that defines a corporate takeover as “hostile” is the fact that the transaction is opposed by the target companies’ management.

Corporation Corkboard Word Concept with great terms such as business, public, articles and more.

In many cases, a shareholder rights plan, often referred to as a “poison pill,” is an extremely effective tool to prevent hostile takeovers of publicly traded corporations. Basically, these plans trigger rights for existing shareholders that, when exercised, make the potential transaction much less attractive for a potential buyer. As a result, potentially hostile acquiring parties are then economically incentivized to negotiate with the target company’s board of directors, strengthening the target’s bargaining position.

While there are many potential types of shareholders rights plans, two of the most common are “flip in” and “flip-over” plans, which are detailed below.

“Flip-in” shareholder rights plans

In this type of plan, existing shareholders of a company are able to purchase addition shares of stock at a discount but does not offer the acquiring party the same opportunity. As a result, the value of the shares that were purchased are by the acquiring party are diluted due to the market being flooded by new shares, as well as providing the existing shareholder with immediate profit due to the difference in the discounted and market value of the shares purchased.

“Flip-over” shareholder rights plans

On the other hand, a flip-over plan allows existing shareholders to purchase the shares purchased by the acquiring party at a discount. When exercised, this type of right causes dilution and devaluation of the acquiring party’s shares.

In order to be effective and legally enforceable, a shareholder rights plan must be properly drafted, structured, adopted, and exercised. For this reason, any company considering protecting itself from hostile takeovers by using a shareholder rights plan should consult with an attorney familiar with them.

Contact a San Jose business lawyer today to schedule a consultation

In many cases, an effective and enforceable shareholder rights plan can help ensure that a company is able to strengthen its position when approached by a potential buyer as well as defend itself from hostile takeover attempts. As a result, any business that is considering going public should discuss the implementation of any plan with an experienced San Jose business attorney. To discuss your options with one of our lawyers, please call the Structure Law Group today at 408-441-7500.

California law imposes fiduciary duties upon the officers and directors of a corporation which requires them to conduct themselves in a certain way with regard to the corporation and its shareholders. A fiduciary duty is the highest duty that the law can require and it requires those upon whom the duty is imposed to act only in the interest of the party to whom the duty is owed. The fiduciary duties of officers and directors of a corporation have been codified in California Corporations Code § 309(a), which reads:

“A director shall perform the duties of a director, including duties as a member of any committee of the board upon which the director may Integrity word cloud concept with honesty trust related tagsserve, in good faith, in a manner such director believes to be in the best interests of the corporation and its shareholders and with such care, including reasonable inquiry, as an ordinarily prudent person in a attorney like position would use under similar circumstances.”

 

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Many business owners rely on ideas, formulas, inventions, and other types of intellectual property (IP) in order to make a profit. In fact, IP can be one of the most valuable assets of a company. Your specific product, brand, and other identifiers are often the components that define you and set your business apart from others. Therefore, protecting your IP is extremely important to the success of your venture. In order to prevent others from misappropriating your valued intellectual property, you always want to obtain formal legal protections.

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There are many options for protecting your IP, and choosing the right one may be confusing for business owners who are not familiar with the relevant laws. Many business owners receive denials for their applications for patents, trademarks, and copyrights and do not know what their options are from there. Fortunately, an experienced business attorney can help you achieve trade secret status for your IP, which may actually be more beneficial than other protections in several ways. Continue Reading

If you’re thinking about starting a nonprofit, there are some steps to take before you begin. Forming a nonprofit organization is much like starting a regular corporation, except there are several additional steps you must take to ensure tax-exempt status, which includes a rigorous application process. Here are some common questions and their answers about forming a nonprofit organization.

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Forming a Nonprofit Organization: Common Questions and Answers

What does ‘501(c)3’ mean?

Being a 501(c)3 corporation means a company has been approved by the IRS as a charitable organization, exempt from specified taxes. The IRS may grant your nonprofit organization tax-exempt status if the nonprofit was formed for religious, charitable, scientific, literary or educational purposes, so long as the nonprofit does not distribute profits to individuals above reasonable compensation. Continue Reading

January 1st brought 930 new California laws which are enforceable in the new year. We’d like to share some of the new and relevant laws for 2015 that may affect you and your business activities. Here are 7 new federal and California laws that took effect January 1st.

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7 New Laws for 2015

  1. Driver’s Licensing

Experts expect more than a million applications for California driver’s licenses to flood the DMV offices following new laws allowing non-U.S. citizens without documentation to get driver’s licenses. Continue Reading

A B Corporation, also called a B Corp, Benefit Corp, or B Corp Certification, is a third-party designation for a socially responsible business that assures the public it has passed rigorous standards of environmental and social performance, as well as a commitment to fostering open communication and transparency. The Certifications are issued to for-profit companies by B Lab, a U.S. based non-profit.

Currently, there are over 1,000 Certified B Corps covering more than 60 industries. Becoming a B Corporation can be beneficial to your bottom line when considering business entrepreneurship. Here are some things to know about achieving B Corp Certification for your company.
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Provisions of B Corporations
Making sure you are in legal compliance is one of the first steps to starting a business. B Corps have provisions attached to certification such as establishing a public cause, transparency, and proof of continuing benefit to society and the environment. Continue Reading

Are you thinking about starting a business? The success or failure of your business venture depends on your ability to plan ahead, take action, and respond to what happens after your idea becomes a company. Here are 4 actions to consider on your path to business success.
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Building a Successful Business: 4 Steps
1. Clearly Define Your Vision and Goals

Business success comes through hard work and dedication. Having a clear vision and measurable goals is the first step. Write down your plans for the future of your company, both short term and long term. It can also be helpful to scout out your competition to see if your plans will hold up in the market. This is known as market research, and it will allow you to identify whether a similar product or idea is already out on the market. Continue Reading

In any business venture, compliance with applicable laws and regulations is essential. These vary significantly depending on your industry and the jurisdiction in which you operate. In some cases, you may be subject to licensing and permitting requirements on the federal, state, and municipal levels. While many entrepreneurs are understandably excited to begin operations, failure to obtain the required licenses or permits can have serious consequences. In some cases, noncompliance with the applicable business regulations in your jurisdiction could even result in criminal charges or significant fines, potentially putting you out of business.

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Regulations regarding business licenses and permits are often voluminous and difficult for even sophisticated business people to understand. Anyone considering starting or expanding a business in California should contact an experienced attorney to discuss their circumstances.

In the meantime, here is some information about some of the more commonly required business permits and licenses. Continue Reading

Breaking away from the rest and forming your own business is a dream for many people. Business entrepreneurship can be a risky but rewarding venture, and it’s possible to achieve great success in your new company. Although running a business takes a lot of hard work and has challenges, you can reach a high level of success. Here are four keys to achieving great things as a business owner, as well as some advice from successful entrepreneurs.

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Business Entrepreneurship: 4 Keys to Achieving Success

1. Hire a Lawyer

“Surround yourself with great mentors.”-Thalej Vasishta, CEO, Immigration Lawyer

Sound advice and a strong team to lean on are essential for entrepreneurs. One of the first things you should do when starting your company is hire a lawyer. Choosing a business entity and licensing can be intricate, so have all paperwork looked over before making big decisions. A good business lawyer will be able to guide you through the whole process and assist you in protecting your intellectual property rights along the way. Continue Reading