Back in January 2023 we wrote a short article explaining earnouts entitled Resolving Valuation Deadlocks in M&A: The Strategic Role […]

Congratulations on Buying Your First Business! Here’s What Comes Next. Purchasing a business is a significant achievement, and the journey

Under Texas law, shareholders of corporations and members of limited liability companies (“LLCs”) have the right to inspect the company’s books and records, provided they have a proper purpose. This right, outlined in the Texas Business Organizations Code, ensures that investors can assess the financial health of the company and monitor for potential misuse of assets or self-dealing.

In corporations and closely held companies, ownership is determined by the number of shares held. For example, a shareholder owning 1,000 shares in a company with 10,000 total shares has a 10% ownership stake. However, this ownership percentage can be threatened by dilution, a common concern for minority shareholders. For example, if the company issued an additional 10,000 shares, that 10% stake would then drop to 5% of the company.

From major mergers and acquisitions (“M&A”) to the purchase of real estate or even a simple inventory order, all business transactions are essentially contracts. While we may not think of smaller purchases in legal terms, they fulfill the same basic principle of a legally enforceable agreement: two parties agree to exchange something of value. For instance, when you pay for inventory, and the seller promises to deliver them, you’ve entered into an agreement.

However, not all agreements go smoothly. While failing to deliver inventory may be a minor inconvenience, breaches involving more significant transactions, such as business purchases, can lead to serious consequences. In business purchase agreements, the goal is to safeguard rights, minimize damages and pursue appropriate remedies when contractual obligations are not met resulting in a breach of the business purchase agreement.

Many aspiring entrepreneurs dream of running their own business, but aren’t sure where to begin. A common assumption is that starting from scratch with a groundbreaking idea and building a company from the ground up is the only option.

While launching a business from the ground up is a popular route, it’s not the only way. Buying an established business is another viable option, and with proper research and guidance, it can be a rewarding path to success. Deciding between these two approaches requires weighing the pros and cons of each to determine which aligns best with your goals.

In Ap-Fonden v. Activision Blizzard, Inc., C.A. No. 2022-1001-KSJM, 2024 WL 863290 (Del. Ch. Feb. 29, 2024), the Delaware Court of Chancery declined to dismiss claims asserting that Activision Blizzard, Inc.’s (“Activision”) Board of Directors violated Section 251(b) of the Delaware General Corporation Law (“DGCL”) by approving a merger agreement with Microsoft Corp. that was allegedly incomplete. This decision, authored by Chancellor McCormick, underscores the need for boards to ensure that merger agreements meet statutory requirements before approval.

In April 2024, the Federal Trade Commission (“FTC”) finalized a rule that broadly bans non-compete agreements for employees across all levels, with only narrow exceptions. This decision comes after a lengthy review process, which included almost 30k public comments on the initial proposal from January 2023. Although the rule passed narrowly (3-2 along party lines), it has not yet taken effect, and legal challenges are already underway.

A Private Placement Memorandum (“PPM”) is a detailed legal document used to offer ownership stakes in a company to investors who are Accredited Investors as defined by Regulation D of the Securities and Exchange Commission (“SEC”). It serves as a tool for raising capital, especially when traditional financing options are unavailable or unsuitable.