The Dilemma

On the one hand, that person is a shareholder—a partial owner/investor in the business. On the other hand, that person also is not an active part of the business, and you may feel hesitant to be showing sensitive corporate information to someone that is not an employee or officer of the business.

What Information Should be Provided?

So what do you have to show a shareholder?

The first requirements Is that the shareholder has to inform the company, in writing, that he or she wants to inspect books and records. The notice must be provided no less than 5 business days before the information is being demanded by the shareholder.

You do have a right to restrict inspection to just your office, or headquarters, and only during normal business hours.

If requested, you must provide to a shareholder the following information:

• Any accounting information, including any financial statements and records of any moneys paid to any corporate officers
• Records of minutes of any meetings including any committee meetings
• Any records of actions taken by the company without a meeting
• Documents related to corporate governance, like bylaws
• Disclosures of information related to legal claims and lawsuits, whether filed by, or against, the company

Limitations on Access

The right to access information and documents is not absolute. The company has a right to refuse (or redact) information which is protected by the attorney client privilege. They also can refuse to provide information that could disclose a trade secret or information that may be proprietary.

Additionally, a request for information by a shareholder can be denied, if the shareholder is requesting the information in bad faith. Bad faith doesn’t mean that you disagree with the shareholder’s purpose in inspecting the records. Companies should be careful that they have objective evidence of a bad faith purpose by the requesting shareholder, before just denying access to records.

Note that once a shareholder stops being a shareholder, the right to access information ends; a former shareholder does not maintain a continuing right to inspect books and records.

While you can deny a request for records by a shareholder for any of the reasons stated above, if the shareholder challenges you in court, and wins access to the records, you could end up owing the shareholder his or her attorney’s fees and legal costs.

Because of the broad right to information that shareholders have, companies should be wary, where possible, of the language used in or information contained in corporate documents.

Problems with shareholders–or are you a shareholder that is not being given your rights? Call the Fort Lauderdale business lawyers at Sweeney Law P.A. at 954-440-3993 today for help.

Sources:

dos.fl.gov/sunbiz/other-services/reporting-of-beneficial-ownership-information/

floridaregisteredagent.net/business-privacy-in-florida/

But a new case is something that those in this business should be aware of, and it has to do with the existence and survival of government liens put on properties.

Liens and Lien Priority

In a normal scenario, at least in Florida, when a lienor or lender forecloses on property—say, a senior mortgage or lienholder—all other liens and encumbrances on the property that are inferior (that is, which are filed or recorded afterwards) get wiped out in the foreclosure. That includes, in some cases, some kinds of government liens on property.

That’s largely a matter of due process; inferior lienors get served with the lawsuit, have the chance to defend the lawsuit, or do a number of other things to protect their rights in the property and their lien.

Nonjudicial States

But not all states work like Florida. In some states, lienors can foreclosure without court action—called a nonjudicial foreclosure. In those cases, there is never any “foreclosure case,” the whole foreclosure process happens outside of the court system, but generally has the same ultimate effect as in states like Florida, where foreclosure is an actual lawsuit.

Government Liens May Survive

But in the 8^th federal circuit (which does not include Florida, which is in the 11^th circuit), a new federal case recently held that government liens cannot be wiped out by a foreclosure even if the government lien was inferior to the foreclosing lien if the foreclosure is nonjudicial. There must be an actual court case.

Effect on Florida Companies and Buyers

But in Florida, there is no nonjudicial foreclosure—so is this even an issue for those buying properties? It depends. It certainly is an issue for those buying and fixing properties in other states, where there may be nonjudicial foreclosures.

Florida also allows non judicial foreclosures in certain, very limited circumstances, like tax deed sales. This is where property is put up for auction to the public, when county property taxes aren’t paid. People bid on the properties at public auction—but there is no foreclosure case.

People who purchase property at a tax deed sale, and where the property has a lien from the government on it, may have to do a separate judicial foreclosure to get rid of the lien. We say “may have to,” because again, the case that said this is not a Florida case—but it is possible a Florida court would follow that ruling, and it is also likely that title insurers will start to require this extra step to insure property.

Call our Fort Lauderdale business lawyers at Sweeney Law P.A. at 954-440-3993 today for help with your business law needs.

Sources:

casetext.com/case/show-me-state-premium-homes-llc-v-mcdonnell

brevardclerk.us/tax-deeds

But they do. And if it’s your insurance company that goes under, what happens next?

Are You Safe?

You may think that your insurance company is safe, because you are insured in a relatively safe “smaller claim” industry. For example, business interruption insurance can lead to decent sized claims, but generally, there aren’t that many catastrophic claims at one time, that would cause an insurance company to go out of business.

But what you forget is that the insurance you have for errors and omissions, or business interruption, or your renters insurance, is often provided from the same company that does insure major, catastrophic damage claims—for example, homeowners insurance claims.

And when you turn on the news and hear about an insurance company going under and into bankruptcy after, say, a hurricane, often, they bring the smaller business-related coverages down with it.

FIGA to the Rescue?

Of course, people can’t just be completely uninsured, especially when they have paid for a policy, and did nothing wrong to cause their insurance company to declare bankruptcy. That’s why the state maintains, runs and operates the Florida Insurance Guarantee Program, or FIGA. When an insurance company files for bankruptcy, FIGA steps in.

How does the state pay for this? Well, you do, in a way. All Florida insurance companies contribute to the costs associated with FIGA, and they pass those expenses along to you, through your premium.

In the event of a bankruptcy to your insurance company, FIGA will take over, and give you the same coverage your old insurance company provided, along with abiding by all the other provisions of your former policy—including denying claims under any exclusions that you had. In other words, FIGA won’t provide you any more coverage that you had under your old, bankruptcy insurance company.

But it may provide you less. That’s because there is a $300,000 maximum policy limit on FIGA claims. So if your old policy was for more than that, you may have a problem, if you have a larger claim while insured by FIGA.

Limitation on Using FIGA

That shouldn’t be a huge problem though, because you only have 30 days to stay on FIGA. That means that you have 30 days to procure “real” coverage from an actual insurance company. After that 30 days, FIGA will no longer insure you-which could be a problem for more than insurance coverage reasons.

Many commercial leases, mortgages, and other contracts require you to carry valid insurance. Allowing FIGA to expire, without replacement, could lead to more legal problems than just a bankrupt insurance company.

Questions about insurance or other parts of your business? Call our Fort Lauderdale business lawyers at Sweeney Law P.A. at 954-440-3993 today.

Sources:

figafacts.com/

myfloridacfo.com/division/receiver/guide-to-the-receivership-process/floridainsuranceguarantyassociations

Anything that deceives consumers into paying money, signing up for anything, or which makes it harder or more confusing for a consumer to cancel any service that they are paying for, is considered a dark pattern. Dark patterns come in many different forms, but some of the more common techniques that many websites use are these:

Hidden Ads – Often, pages on the website will seem neutral, or will seem like they are reviewing products, or that they are unaffiliated with any company. In truth however, a company is “behind” those sites, with an agenda—usually to sell the product or service that gets the “best review.”

Anything that purposely hides the fact that a website or editorial content is an advertisement, can be considered a dark pattern.

Limited Sales – Often, companies advertise that something is on sale for a limited period of time, when in actuality, the sale will last forever-the sale price is the actual price. Making consumers believe they better act fast, to get a better deal, when that deal will actually never go away, can get your business in trouble.

Cancellation – It used to be that for consumers to cancel subscriptions or services, they would have to navigate through complex and buried menus and submenus, or cancellation was hidden in pages that a consumer wouldn’t think to look in.

Many major services today make cancellation much easier because of government fines and crackdowns, but you should always avoid making it difficult or confusing for a consumer to cancel a service or subscription.

“X-ing Out” Pop Ups – Ever notice that a pop up often comes up to advertise something, and it is often difficult to figure out how to actually close that window or pop-up? Sometimes you can’t even find the little “X” needed to close the window.

Making it difficult to close windows that have ads or promotions, is considered misleading and the government will fine your business for doing this purposely.

Watch your language – You can even get in trouble for disparaging customers who do not want to do business with you.

For example, imagine a page asking someone to sign up for your service. If they want the service, that’s easy, they click “Yes.” But if they don’t, the button says “No thanks, I don’t like to save money,” or “I’ll make a mistake and pass on the offer,” or something that suggests fault, shame, or foolishness, for rejecting an advertised product or service.

That kind of disparagement is a dark pattern and can get you in trouble—and yes, the FTC can, and does, fine websites and businesses that engage in these practices.

We can help you market and advertise the safe way. Don’t get in legal trouble. Let us advise you and legal ways to promote your business. Call our Fort Lauderdale business lawyers at Sweeney Law P.A. at 954-440-3993 today.

Sources:

ftc.gov/news-events/news/press-releases/2022/09/ftc-report-shows-rise-sophisticated-dark-patterns-designed-trick-trap-consumers

vox.com/recode/22351108/dark-patterns-ui-web-design-privacy

Confusion Over Fraudulent Transfers

Fraudulent transfers can be difficult to spot, and businesses that engage in them may not feel like they are doing anything wrong.

The logic to some is that there is nothing illegal about selling things, especially when you need money, and there is nothing fraudulent about either selling or transferring an asset or valuable. This is especially true when there is a history of selling or transferring particular goods, property or assets.

You may be the party trying to avoid creditors, and thus, transferring or selling assets, but you could also be the party trying to collect on a contract or on a judgment, and end up frustrated that a company that once had assets, now suddenly has nothing of value to collect upon.

For creditors, knowing what a fraudulent transfer is can help them collect on judgments or debts that may otherwise have been uncollectable.

What is Considered Fraudulent?

Anything that someone who owes money does to evade creditors or keep them from collecting on a debt, by disposing of assets, is engaging in a  fraudulent transfer. That can be outright selling, but it could also be changing title to property, or just getting rid of property.

On the one hand, to be fraudulent, the debtor must be getting rid of assets or property intentionally. But that can be hard for a creditor seeking to undo a transfer, to prove. So, the law allows a creditor to show other objective factors in order to show a fraudulent transfer.

Looking at Consideration

One objective factor is whether property that was sold, was sold for adequate and fair consideration. Selling a business’ heavy and expensive machinery for $100 is likely just an attempt to evade creditors. This means that parties trying to show a transfer was fraudulent may have to demonstrate the value of the sold or transferred property, to show that what was paid, was wholly inadequate.

Who is Getting the Property?

Just as important as how much property was sold or transferred for, is to whom it was transferred to.

Selling assets or property to “insiders,” will be seen as fraudulent. Insiders are relatives, close friends, or close business associates. It may be companies that have some relationship or association with the debtor company or person.

Creditors that can show fraudulent transfers, may be able to get a judgment against the party receiving the assets or property. Creditors may also be able to undo the transfer, getting the money or property back, to satisfy the debt.

Let us help you with the best way to avoid, or collect on your business debt. Call our Fort Lauderdale business lawyers at Sweeney Law P.A. at 954-440-3993 today.

Sources:

leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0726/0726.html

law.justia.com/codes/florida/2005/TitleXLI/ch0726.html

Which Is It?

One common mistake in lending agreements is the failure to specify whether money being given is a loan, or an investment.

You would be surprised how many times people talk and discuss money, and they have what they think is an understanding of whether money is a loan or an investment, but later, when the agreement needs to be enforced, they then look at their agreement and find that it isn’t so clear.

Certainly, there are times when this is obvious. Certain kinds of loans have nothing to do with investing. But in other cases, it may not be so clear, and the wording of the loan agreement can create more confusion or ambiguity.

Why it Matters

The difference is a crucial one: generally, investors don’t have to be paid, if the business legitimately falters, or if there is no money to pay the investment back, whereas, a loan needs to be paid back no matter what.

Many people purposely play fast and loose with the rules, and confuse the two: for example, they may want the money to seem like an investment to try to avoid interest and usury rules, but also, they want the money to be a loan, to ensure that they get paid back. The result is a loan document and is ambiguous and confusing.

When There is Confusion

To see if a contract is a loan or an investment, courts will look beyond what you call the document. Rather, courts will look at what the context of the document says, and whether there are the typical hallmark signs of a loan.

For example, if the document calls for regular payments, interest or late penalties, end payment dates, acceleration, or default terms, these are elements that are common in loan contracts, and thus, courts will construe it as a loan regardless of whether the word “investment” is in the agreement.

Loans typically have regularly owed, consistent repayments, whereas investments don’t; they will be sporadic and not paid on a regular basis.

Loan repayments will be stated: whatever the contract says they are, is what they are. Investment repayments will usually need calculation: for example, calculating what the profit of the business is, or what percentage of the profits get repaid to the investor.

 Unenforceability Problems

Investments that courts see as loans can end up unenforceable because of usury; many of the repayment terms on an investment would be usurious, if they are considered interest on a principal balance.

Trying to collect on a loan or are you owed investment money? Call our Fort Lauderdale business lawyers at Sweeney Law P.A. at 954-440-3993 today.

Sources:

economics.stackexchange.com/questions/18531/what-is-the-difference-between-a-loan-and-an-investment

nationalfunding.com/blog/investor-vs-loan-which-is-smarter-for-your-business/

What Does Bankruptcy Mean to the Creditor?

Bankruptcy means that in most cases, the other side to your agreement does not have to perform under your contract, and/or does not owe you any money, if there is money owed. And because you cannot contract away the right of a party to file for bankruptcy, you cannot insulate yourself from this risk, by having a party promise in their contracts they won’t file for bankruptcy.

Notice of Filing

You will know if a party filed for bankruptcy, because you will get notice of the bankruptcy from the bankruptcy court. This comes from the debtor listing you as a creditor in the bankruptcy schedules.

Getting this notice is confusing for most parties—unlike the debtor who has probably consulted with a lawyer, and thus, may have an understanding of what will happen and what to expect in bankruptcy, you didn’t have that same opportunity, and are now facing a loss of an expected financial opportunity through the possible bankruptcy discharge.

What to Do Next?

The first thing you should do when you get a notice of bankruptcy, is really something you should not do: don’t try to continue to collect the debt, in any way, shape or form; don’t even suggest payment, or work out a solution to the debt, or do anything that could in any way be construed as an attempt to collect the debt.

When the bankruptcy is filed an automatic stay will go into effect; this stay prohibits all creditors from making any attempt to collect a debt, and bankruptcy courts will sanction creditors that try to evade this bar, even if the attempt to collect is innocent.

What Kind of Bankruptcy?

What will happen to your debt largely depends on the type of bankruptcy being filed. Businesses that file for Chapter 7 do not get a discharge, but individuals do. In Chapter 13, you may be paid some on your claim, but only over time, and possibly, not 100% of your claim.

Larger businesses tend to file Chapter 11 claims, where most debts will be discharged, although some with priority will be paid. Because Chapter 11 cases can be long, with multiple creditors all wanting to get paid, the cost of fighting to get paid in bankruptcy court is something to consider.

Any debt that is secured by a lien is in a better situation, as liened property can be taken even after a bankruptcy, even if the debt related to or secured by the lien, is discharged.

Trying to collect on a contract? We can help. Call our Fort Lauderdale business lawyers at Sweeney Law P.A. at 954-440-3993 today.

Sources:

levelset.com/blog/does-a-mechanics-lien-secure-debt-in-bankruptcy/

jdsupra.com/legalnews/how-bankruptcy-affects-mechanic-s-lien-64430/

Who Owns and Can Sell the LLC?

Such is the case with 80s icons Daryl Hall and John Oats. The duo, under the name Hall and Oates, are responsible for some of the most iconic and well known songs of the 70s and 80s. As early as last year they performed together, but a recent lawsuit has revealed that behind the scenes, legally, things are hardly friendly between the two.

Some time ago, the two decided to put the many assets that are a result of their music and fame, into an LLC. The LLC became the legal owner of things like the music, the duos’ likenesses, royalties, merchandising, and other assets related to their music.

According to Hall, there was an agreement that neither could sell their part of the LLC to anybody.

This is common in partnerships, and LLCs. The owners, partners or members, only want to work with the other partners or members. They don’t want someone selling their share, and thus, the LLC or the partnership then has to work with a stranger, or at least, someone they don’t want to work with.

In most cases, the partnership agreement, or the LLC operating agreement, will have a buyout provision, saying that should a partner lose, or want to give up his or her interest in the partnership or LLC, that the remaining partners or members, can buy out the interest, thus avoiding having to work with outsiders.

Oates Tries to Sell?

Hall, in his lawsuit, alleges that Oates has sold or is about to sell his (Oates’) interest in the LLC, and that violates their agreement. Hall has already obtained a restraining order, preventing the sale of Oates’ interest, until the issue can be determined by a court.

Dispute Over Performance

The duo have actually been in court before, about who has the legal right to perform the duo’s songs.

Details of the partnership agreement between the two are unknown, but as a general rule, so long as a venue has a license to have a song performed, one artist cannot prevent another from performing his or her music.

That general rule can be overridden by an agreement between artists, but nobody knows if one exists that would prevent Hall or Oats individually from performing the groups’ music.

But performance of the duo’s music is one thing. There also may be a dispute over whether one or the other, individually, can identify themselves as “Hall and Oates” and whether they can use that valuable piece of intellectual property individually.

Don’t make common business mistakes. Call our Fort Lauderdale business lawyers at Sweeney Law P.A. at 954-440-3993 today.

Sources:

cnn.com/2023/11/30/entertainment/hall-oates-betrayal-lawsuit/index.html

theguardian.com/music/2023/nov/30/the-ultimate-betrayal-more-details-emerge-in-hall-oates-lawsuit

Your Name Counts

One thing your Articles must have is your company name, which seems like the easy part. Just remember that your company name must designate that you are actually a company—that is, it must have Co. or Corp., in order to designate that you are registering as a corporation as opposed to other types of business entities.

If your company or corporate name isn’t the best to do business with, or isn’t catchy or memorable, that’s OK; you will be able to register a fictitious name, which is the name that you will “advertise to the world.” Your corporation, as you register it, would be the legal owner of the fictitious name, when and if you do decide to get one.

Shareholders and Shares

Your articles don’t have to go into great detail about shareholder rights, how shareholders vote, how shareholders can lose shares, or when and how dividends are paid out.

However, the Articles do have to say how many shares will be issued initially, and designate classes of shareholders. For the purposes of Articles, you only need to say you will have a certain number of a given class of shareholders. You’ll save more detail about shareholder rights and classes, for your bylaws.

Incorporators and Registered Agents

Articles also must designate who the incorporators are. This can be the owners of the company, but don’t have to be. Incorporators are just people who are incorporating the company, giving them the right to sign or file whatever documents necessary to actually start your company.

The State requires that your Articles have a Registered Agent. This is someone who is authorized to accept service of process if you are sued, and who is generally authorized to get any notice from the company. Your resisted agent must reside or be headquartered in Florida, and must accept the position with a letter of acceptance.

Purpose of the Company

Your articles should state the purpose of the company. Many people choose “for any lawful purpose,” which is fine to give your company broad authority to do what it wants (and to expand into other ventures in the future), unless you want to limit the business of your company.

Remember that your Articles are just the start. They are not a replacement for Bylaws, or Management Agreements or other forms of corporate governing documents. Those documents will say more about day to day operations, and the rules that govern your company going forward.

Call our Fort Lauderdale business lawyers at Sweeney Law P.A. at 954-440-3993 today to help you start that new business or draft your corporate documents.

Sources:

efile.sunbiz.org/profit_file.html

dos.myflorida.com/sunbiz/start-business/efile/fl-profit-corporation/

What is an Injunction?

An injunction is a court order that requires that a party cease whatever behavior the other side finds to be offensive or illegal.

And while stopping illegal or damaging activity is very helpful if you are the one being damaged, there is often an inherent problem: When someone is doing something to harm your business or cause you damage, you need that behavior to stop now, immediately: not a year from now when your case eventually makes its way on the court’s trial docket.

That’s why the law allows parties to ask for a temporary injunction. A temporary injunction is where a court stops offending behavior temporarily, pending the ultimate outcome of a case.

As it is temporary, it can be lifted anytime, especially if the final outcome of the case ends up in favor of the party against whom the injunction was entered against.

Proof to Get the Temporary Injunction

To ask a court for a temporary injunction, the party that is asking for the injunction should be able to show three things:

1)      That the party asking for the injunction, has a good chance at winning the case. This often involves proffering evidence to show the court why there is a strong case

2)      That there is irreparable harm that will be caused, if the offending behavior is allowed to continue, and

3)      That the party that is asking for the injunction can’t be fully made whole, though money damages alone

Temporary injunctions are often used in cases that may involve:

• Dissemination or sharing of confidential or trade secrets, where the longer the misappropriation goes on, the worse that the damage becomes
• Defamation or defamatory statements, where the longer the statements are published or available, the more harm someone suffers
• Breaches of noncompete agreements, where a former employee is working with a competitor, and perhaps, taking employees or customers from the former employer
• Infringement of intellectual property, where someone is diluting a trademark, or profiting off someone else’s copyrighted works

There Are Risks

One risk of asking for a temporary injunction is that to show your case is strong, thus warranting the entry of the injunction, you could be “showing your hand” to the other side, early on in the case. And if your request for the injunction is denied, it could embolden your opponent, who now, during the pendency of the lawsuit, can continue doing what it was doing.

Do you need an injunction to protect your business? Call our Fort Lauderdale business lawyers at Sweeney Law P.A. at 954-440-3993 today.

Sources:

casetext.com/rule/florida-court-rules/florida-rules-of-civil-procedure/rules/rule-1610-injunctions

leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&URL=0000-0099/0060/0060.html