An Illinois foundation that doles out college scholarships was among the investors in what the FBI claims was a foreign currency scam involving two Bergen County men.

In what appears to be the first investor lawsuit in the unfolding case, the MWF Foundation Inc. — a non-profit run by Michael Fehrenbacher — invested $655,000 into the alleged fraud.

The suit, filed Monday in federal court in Illinois, sheds new light on who invested in an alleged fraud involving foreign currency trading as well as others associated with the case.

Samuel Neschis, Fehrenbacher’s attorney, said the foundation also donates to food pantries. “They’re unable to make additional grants at this time,” Neschis said.

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These stockholder and partner freeze outs and squeeze outs are a series of actions taken by one or more of the partners or stockholders against the target partner or stockholder intended to coerce them into giving up their stake in the business.  Some of these tactics are terminating the employment of the target partner or stockholder including locking the individual out of the business premises.  Other tactics include removing the target as an Officer and or Director on the Board of Directors.  Still other tactics either by itself or in conjunction with other tactics will include a forced buy out of the partner’s partnership interest or the stockholders shares at a “take it or leave it” price.

Often there exists a fiduciary duty between stockholders of a closely held corporation or between partners in a closely held partnership.  This raises the question whether stockholder freeze out or partnership squeeze out practices violate the fiduciary duty between shareholders or between partners.

Various jurisdictions have answered this differently and several jurisdictions have held the fiduciary duty does not extend to squeeze out and freeze out tactics.  Do you know what the law is in your jurisdiction?

For more information on squeeze outs and freeze outs, shareholder or partner disputes, minority oppression, or other corporate law concerns, contact Horowitz & Weinstein.

Disclaimer.

For more information on deadlocks, shareholder disputes, or other corporate law concerns, contact Horowitz & Weinstein.

Disclaimer.

This provision provides several areas of contrast to the natural inclination.  For example, the phrase “fair value” is not necessarily “fair market value”.  Moreover in the absence of an appraisal, Courts have valued the stock of a family corporations or closely held corporations by using a combination of earning capacity, investment value, history and nature of the business, economic outlook, book value, dividend paying capacity, and market price of stock of similar businesses.  Even if one argues these criteria are inherently built into a corporation stock appraisal and therefore clouds the difference between “fair value” and “fair market value” the Courts are allowed to take into consideration “the reasonable expectations of the corporation’s shareholders as they existed at the time the corporation was formed and developed during the course of the shareholders’ relationship with the corporation and with each other.” If every appraisal were to factor in the “reasonable expectations of the corporation’s shareholders as they existed at the time the corporation was formed” then the shares of almost every corporation would be “priceless”.

For more information on valuations or other corporate law concerns, contact Horowitz & Weinstein.

Disclaimer.

On the level of the individual, a fairly effective way to sum up US law would be “majority rule with protections in place for minority interests.”  Thus we have the Bill of Rights, the Civil Rights Act, etc. The world of corporate law looks a little different.  There majority rules and protections for minority interests are minimal.

By far the most commonly used and arguably one of the most powerful avenues of defense for the minority interest in a shareholder dispute or any other kind of squeeze play lies in the concept of fiduciary duty.  Fiduciary means having an obligation to act in someone else’s best interest.  It’s a word with numerous legal applications but in the context of a shareholder dispute, it generally refers to the responsibility of a corporate board to act in the best interests of the corporation and of the shareholders.  This would also apply in partnerships.

A squeeze out is a somewhat informal term for what happens when a person or persons which together have a majority interest in a business try to convince or coerce a minority interest to sell their control.  There are numerous means by which the majority party can try to accomplish this, everything from intentionally devaluing shares to denying dividends to rescheduling shareholder meetings with minimal notice.  In most cases, recourses for the oppressed minority are few.

But the concept of fiduciary duty can prove an effective defense.  There’s no clear cut line here, no sharp divider between legal and illegal.  Every case will be different.  But in general principle, if an oppressed minority can show that the majority’s actions are not in the best interests of the company as a whole, it is possible to resist the squeeze play.

Again, every case is unique and as such it’s not only difficult but quite unhelpful to get too much into broad, general statements.  The best avenue for any party in a squeeze out, shareholder dispute, or partnership freeze out scenario is to seek professional counsel.

For more information on shareholder disputes, fiduciary duty, minority oppression, or other corporate law concerns, contact the Chicago corporate lawyers at Horowitz & Weinstein.

Disclaimer.

It’s an unfortunate but true fact of corporate life that shareholders don’t always see eye to eye.    Disagreements can escalate to conflicts.  A common occurrence when shareholders fight is for the majority to try to coerce the minority, mainly to try to get them to sell or give up their shares.  There exist any number of reasons why a majority shareholder might seek to oust a minority–although greed or lust for power probably jump to mind, usually the motivations boil down to a business decision–but whatever the reason behind it, when the majority tries to force out a minority shareholder, it’s called a squeeze out.

While the Constitution makes provisions to preserve the rights of minority party’s against any possible tyranny of the majority, in the corporate world few such safeguards exist.  There are numerous strategies a majority shareholder can undertake to try to force a minority shareholder to sell.  In many cases the squeezed party has far fewer options.

The weapon of choice (legally speaking) for most targets of squeeze play looking not to go down without a fight lies in the idea of fiduciary duty.  Although there’s nothing in corporate law that requires minority shareholders be defended as such, all members of a corporate board have a fiduciary duty, that is they are required to act in the interests of the company at large.  The standard defense against squeeze play is thus to argue that the squeezer is acting not in the best interests of the company but for his or her own personal advantage, perhaps at the expense of the overall wellbeing of the company.

Every squeeze out situation is different and shareholder disputes are rarely simple.  For more information on shareholder disputes, minority oppression, squeeze play or other corporate law concerns, contact the Chicago corporate attorneys at Horowitz & Weinstein.

Legal Disclaimer.

Purchasing a business can unfold in several different ways.  In general, some forms favor the seller, others the buyer, and in most business entity purchases and sales each party generally wants to pursue the method that most favors them.

Sellers often prefer to sell stock or LLC membership interest.  Most of the tax advantageous in such a process will favor the seller.  Buyers generally prefer to purchase assets.  This is often advisable to help the buyers avoid any “skeletons” or legal baggage.

We have represented both buyers and sellers in business entity purchase and sales.

Please contact us for more information.

Legal Disclaimer.

Shareholder agreements go beyond the provisions contained in most corporate bylaws and minutes.  They are recommended for most small corporations to help provide structure in common issues such as salaries of shareholders who are also employees; expense reimbursements; providing a structure in the event a shareholder is no longer an employee; providing a structure in the event a shareholder wishes to exit the corporation; as well as other relationships between shareholders.

We have draft and review shareholder agreements.  When a shareholder dispute arises we look to shareholder agreements as one of the starting points to determine the rights of our client.

Please contact us for more information.

Legal Disclaimer.

There are plenty of reasons why a company based outside the United States might want to enter the US market.  Whatever the motivation behind it, the actual process of establishing a US presence can be complicated and failure to plan appropriately can expose a company to significant tax burdens or other negative consequences.  It’s always advisable therefore, when looking to make a move into the US, to plan ahead and to ask the experts.

There are generally three main methods of entering the US market: opening a branch office, creating a US subsidiary, and partnering with an existing US corporation.  In broad strokes, these options represent a trade-off between exposing your business to US taxes and retaining control over the distribution of your products and services.  Opening a branch, for example, gives you the most direct control over your US operations but also entails the highest tax burden.  Likewise partnering with a US company reduces your tax exposure  but also lessens your control over your operations in the US.

The most important thing to remember when considering a move into US markets is that every company will have a different situation, and the particulars of your company will affect which method is most beneficial.  Horowitz & Weinstein have represented many foreign companies and helped them enter US markets.

For more information on bringing foreign business into the US, or for other corporate law concerns, contact the Chicago corporate attorneys at Horowitz & Weinstein.

Legal Disclaimer.