Winstead Business Divorce

Business Trends and Legal Insights for Majority Owners and Minority Investors in Private Texas Companies

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By Abby Kotun and Ladd Hirsch For many company founders, the business they created is far more than an investment and is closer to a baby they have nurtured and supported.  As the company achieves a significant level of success, however, the founders may not be quite as involved in day-to-day operations of the business.  In this later phase, the owners may have retained an experienced CEO along with other senior officers who are striving…
By LaCrecia Perkins and Ladd Hirsch A look back at Business Divorce developments during Texas 2018 reflects a continuing negative trend for private company shareholders[1] who have claims for misconduct against the company’s control group (e.g., majority owners, officers, managers, and/or directors).  The rocky road for Texas shareholders began in 2014 with the Supreme Court’s Ritchie v. Rupe decision,[2] which eliminated the remedy previously available to minority shareholders of securing a court-ordered buyout of…
In her thoughtful column in the January edition of the Texas Bar Journal titled, “Do You Suffer From Impostor Syndrome,” lawyer coach Martha McIntire Newman, focuses on a topic that has too long flown under the radar.  Ms. Newman describes this condition as “a state of chronic self-doubt that causes lawyers to fear they will be exposed as incompetent even though the evidence of their success is obvious to their colleagues and clients.”  TBJ, Jan.…
Conflicts with business partners are not just a serious distraction for majority owners of private companies, these ownership disputes can be expensive, time-consuming and harmful to the long-term prospects of the business.  The start of a new year is therefore a great time for majority owners to consider whether there are steps they can take to head off disagreements with business partners. Fortunately, the answer is yes, and this post looks at New Year’s resolutions that…
When a private equity (PE) firm buys the controlling interest in a private business, the purchase often includes an earn-out provision which calls for the owner to remain active in the business for some period of time. The use of an earn-out provision can seem like a win-win for both parties, because it allows the PE firm to buy the company for a lower purchase price and provides the business owner with the opportunity to…
In the private company world, the buck stops with the majority owners, who generally hold the reins to running the business.  In our experience, however, it is not uncommon for some majority owners to push the limits of their control by engaging in self-dealing transactions that are for their own benefit.  The self-interested transactions in which majority owners may engage can take many different forms, including paying excessive bonuses to themselves, directing the company to…
By Sam Vinson and Ladd Hirsch In his famous “To Be or Not to Be” soliloquy, Hamlet anguished over whether his future was worth living. [1] Hopefully, private company founders picture a future less bleak than Hamlet’s grim outlook. When the founders of fast-growing private companies accept new investment capital, however, they need to consider the future of the resulting ownership structure of the business, particularly when the financing involves issuing new company shares. When…
By Jeff Balcombe [1] — We are pleased to present this guest post from Jeff Balcombe, a highly regarded business valuation expert based in Dallas, who is a founding principal with his firm BVA Group. In a perfect world, business partners who reach the point of parting ways would have a clear, unambiguous plan in place governing their separation.  Unfortunately, when they engage in business in the real world, many company owners who need a…
“The bad things you can see with one eye closed. But keep both eyes wide open for the little things. Little things mark the great dividing line between success and failure.” Jacob Braude, Author and Humorist (1896-1970) By Sean Brown[1] and Ladd Hirsch In business, an eyes wide open approach is essential to the successful purchase of a private company. When the purchaser of a private company enters into a letter of intent (“LOI”) or…
By Ladd Hirsch and Trip Dyer[1] “There is no such thing as a free lunch.”  It is a common expression with a clear meaning— don’t expect to receive something for nothing.  But there is an important corollary expressed less often: it is possible to receive something that will have value in the future, but without having to pay for it now.  Like seeds waiting to sprout, the concept of a private company profits interest fits…