New Haven Legal Blog

New Connecticut Power of Attorney Law Becomes Effective July 1, 2016

20
July
2016

Connecticut’s Uniform Power of Attorney Act becomes effective July 1 2016. Under the new law, individuals commonly referred to as the “principal” may execute a Power of Attorney “POA” designating another individual or someone commonly referred to as their “agent” to act on their behalf or to transact business for them. Key aspects of the new law are as follows:
The new law provides suggested forms that can be used for a POA and also allows the suggested forms to be customized to meet an individual’s specific needs.
The appointment of an agent under a POA is now durable, so unless the instrument expressly provides that the POA will terminate upon incapacity, the POA remains in effect even if the principal later becomes incompetent.
A POA between spouses is now automatically revoked by operation of law immediately upon the filing of divorce or separation.
The new law allows for a principal to nominate a conservator of the person and the estate under a POA and unlike the past law, the Probate Court now has no discretion but to honor such a declaration unless the named individual is unwilling to serve as conservator.
The new law allows a principal the ability to grant their agent broader powers within the suggested form POA instrument. Principals are warned under the new POA forms to obtain independent legal advice before including certain powers set forth in the new forms.
An agent acting under a POA is now held to a new standard of care. Rather than acting in the “best interest” of the principal, the agent must now act in good faith, with loyalty, and avoid conflicts of interest for the benefit of the principal. The agent must also attempt to preserve the principal’s estate plan, including to minimize estate and gift taxes.
The group of parties that have having standing to petition the agent named under a POA to provide an accounting of their actions is now expanded to include a host of parties including ”a caregiver or person demonstrating sufficient interest in the welfare of the principal”.
One of the most significant changes to the new law is the protection provided to a third-party who accepts and/or relies on a POA “in good faith” and without knowledge of the invalidity of the POA document. A third party, including a bank or financial institution must now honor a POA unless the third part honestly believes the POA is revoked, the agent seeks to take action outside the scope of the agent’s authority, the proposed action is illegal, or the agent refuses to provide a legal opinion or certification from the agent stating that the action requested is legal.
Under certain circumstances if a court finds that a third party failed to act in good faith in refusing to accept a POA, the court can award attorney fees to the agent who is forced to go to court to obtain a court order to force a third party to honor a POA.

The new law is extensive and we provide only a brief highlight of key changes under the new law. Please contact us if you have questions concerning the new law and we suggest that each person who currently has a POA should have it reviewed to confirm that their POA fully complies with the new law.

Posted in Uncategorized |

Defend Trade Secrets Act of 2016: Does it impact you?

17
June
2016

The US Congress has created a new federal law, the Defend Trade Secrets Act of 2016 (“DTSA”), that allows parties to use the federal courts to protect their trade secrets where trade secret(s) have been misappropriated if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce. Before this new law, most plaintiffs had to rely on a state’s version of the Uniform Trade Secrets Act (“UTSA”) or contract provisions, if any, they may have used to protect such information.

In fact, the DTSA is similar to the UTSA in many respects although under DTSA, there is a longer statute of limitations and it provides an ex-parte seizure process that is only available in extraordinary circumstances. One key action point for employers under DTSA is a new notice of immunity requirement to employees and contractors in contracts that govern the use of a trade secret or other confidential information. The DTSA provides immunity under state and federal law for employees and individual contractors or consultants of an employer who disclosure trade secrets (i) in confidence to a Federal, State or local government officials, or directly or indirectly or to an attorney solely for the purpose of reporting or investigating a suspected violation of trade secret law; or (ii) made in a complaint or other document filed in a lawsuit or other proceeding, if the filing is made under seal and not disclosed except by court order. Such an individual that files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to their attorney and use the trade secret information in the court proceeding if it is filed under seal and not disclosed except by court order.

Employers are required to provide notice of this immunity to its “employees” which for purposes of the DTSA is broadly defined to include “any individual performing work as a contractor or consultant for an employer”. Employers may satisfy this requirement by cross-referencing another policy document that has been provided to the employee. This requirement applies to contracts and agreements entered into or updated after the date of enactment which was May 11, 2016. Regardless of how the employer chooses to comply, employers will be required to update their applicable agreements and policies to comply with the DTSA. Failure to provide the notice prevents recovery of exemplary damages and attorney’s fees under the DTSA in an action against an employee that did not receive the notice.

The DTSA provides a new and effective tool for protection of trade secrets. Parties are advised to review their consulting, non-disclosure, confidentiality, and non-compete agreements to determine whether they should be revised in light of the DTSA. Feel free to contact us concerning drafting such agreements, protecting trade secrets and the DTSA.

Posted in Labor Laws | Tagged , , |

Department of Labor Changes Overtime Rules – It’s Time to Start Tracking Time!

20
May
2016

The US Department of Labor (“DOL”) recently revamped regulations governing the exemption of executive, administrative and professional (“EAP”) employees from the minimum wage and overtime pay protections under the Fair Labor Standards Act. Effective December 1, 2016, in order to be exempt from overtime pay (“OT”) for working over 40 hours in a workweek, EAP employees must earn at least $913 per week or $47,476 annually. Historically, employers needed to satisfy a (1) “salary basis test” (i.e. fixed salary not reduced by quantity of hours or quality of work performed); (2) “salary level test” (last set in 2004 at $455 per week or $23,660 annually); and (3) a “duties test”, to meet the exemption requirement under FLSA. The “duties test” differs for each category of exemption and was historically the area most employers focused their attention to determine if an exemption applies. In 2004, a test was created for exemption for highly compensated executive, administrative and professional employees (“HCE”) that were paid at least $100,000 annually (and at least $455 per week on salary or fee basis) that had a less stringent “minimal duties” test requirement. The DOL is also raising the HCE compensation requirement to $134,004. Automatic updates to the thresholds will occur every three years beginning January 1, 2020.

This regulatory change means that regardless of whether an EAP employee satisfies the “duties test”, which was not changed by the new regulations, employees are entitled to OT pay if they earn less than $47,476 annually or $913 per week. The DOL claims this simplifies the exemption but employers should begin to regularly track hours of its EAP employees earning less than $47,475 annually to determine the impact of the changes on their business. Also many EAP employees not accustomed to tracking their time will be asked to make an adjustment. In preparation of the change to take effect on December 1, 2016, Employers will be faced with decisions about whether to pay more in wages through overtime premiums, whether to reduce hours worked, pay a lower base wage to offset the new overtime premiums, boost salary above the threshold to avoid tracking time and paying overtime premiums, etc. Not surprisingly, these regulations were applauded by labor groups but not well received by business groups. In addition to the actual financial cost associated with tracking hours, employees aren’t always receptive to doing it and morale may be impacted when a once exempt employee has to “punch the clock”. It remains to be seen how businesses will react to these changes but it is clear that employers should begin to familiarize themselves with these changes as soon as possible. Feel free to contact us if you have questions concerning the new regulations.

Posted in Labor Laws | Tagged , |

Be Careful with Employee Terminations When Selling Business

30
November
2014

When it comes time to sell your business, there are hundreds of different things to think about: Gathering tax forms, putting together financial statements, minimizing the company’s reliance on you, streamline and document processes as much as possible, etc. One of the things that is often far from the top of the list is considering what to do with the current workforce.

Will the employees carry over to the new owners? Will they be paid the same and get the same benefits/insurance? Do they have to be given notice in such cases? If they’re not being brought over to the new owners, when is it required to give them notice?

These are just some of the questions that you will need to ask yourself. The employee workforce is an important part of any business, and the buyers will likely want to take over the existing one, so there’s a good chance it will be covered in great detail by you and your attorney. On the off-chance that the buyer is not interested in your workforce, you will need to take the appropriate steps.

Since every state has some form of employee protection, you will need to be careful not to cross any lines, or you may be opening yourself up for legal trouble. It is not impossible to imagine a scenario where the employees are not told of any pending sale until it is right about to happen, and without any notice, they are not adequately able to find suitable other employment before they are terminated. This could potentially leave you vulnerable to unemployment claims, and even wrongful termination lawsuits.

You also do not want to spread the word too early, since that could damage the prospects of selling the business. Say, for instance, that you are just first getting your information together and finding a sale of business attorney. You might not want to announce your intention to your entire workforce just yet, as that could cause a mass exodus of employees, making your business operations that much more difficult while you’re also courting buyers.

There is a fine line to walk when it comes to dealing with employees and a potential business sale. If you ever have any questions, or are unsure where that line is, do not hesitate to get in contact with a qualified sale of business attorney. They will be able to walk you through the entire process, and will help you maximize your sale price while minimizing your effort.

Source: http://www.lexology.com/library/detail.aspx?g=c0f8fe76-da83-4c26-9281-6de126219424

Posted in Exiting a Business, Sale of Business |

PetSmart Approves Sale of Business to BC Partners

23
November
2014

If you’ve ever had a pet in your life, then you are undoubtedly quite familiar with PetSmart, the giant national pet store chain, where millions of Americans go every year to shop for their pets.

Well, it seems that PetSmart might find itself under new management pretty soon, if a proposed sale of the company goes through. PetSmart recently was offered an $8.7 billion leveraged buyout by BC Partners earlier this year, and the offer was just accepted.

BC Partners, which has owned shares in PetSmart for years, is going to pay $83 a share for the company, just shy of 40% over the PetSmart (PETM) stock closing price back in July. The total equity value of the deal (excluding Phoenix-based PetSmart’s debts) is said to be roughly $8.2 billion.

The initial cry for PetSmart to sell came about from a growing realization that other major retailers were starting to push harder and harder into the pet market.

This isn’t expected to have too much of an effect on the operation of the individual stores in the immediate future, but as upper management is likely to shift around under the new leadership, it’s impossible to know what the distant future will hold. For now, PetSmart operates over 1,300 stores, almost half as many veterinary hospitals, and employs over 50,000 people.

If everything continues forward as planned, the deal is projected to be finalized during mid-2015. The deal will be debt-financed by Citigroup, Nomura, Jefferies, Barclays, and Deutsche Bank.

Source: http://www.foxbusiness.com/industries/2014/12/15/bc-partners-to-buy-petsmart-in-biggest-lbo-14/

Posted in Sale of Business |

Foreclosure by Market Sale – Connecticut’s New Foreclosure Option

18
November
2014

Connecticut has passed a new law, An Act Concerning an Optional Method of Foreclosure ( the ”Act”), effective as of January 1, 2015, providing another option in foreclosure cases, in addition to the traditional standard remedies of strict foreclosure and foreclosure by sale. The new remedy is Foreclosure By Market Sale. There are important points for both lenders and homeowners to be aware of about the Act.

The Act applies only to first mortgages on residential (one to four family dwellings) properties (“Property”) where the amount due on the mortgage, including interest, late changes and any other fees secured by the mortgage, exceeds the appraised value of the Property. In such cases, the Act requires, prior to institution of any foreclosure action, that the lender give notice to the homeowner by registered or certified mail advising the homeowner of its rights under the Act to seek a foreclosure by market sale.  The Act gives the homeowner 60 days to respond to the notice and to start a negotiating process with the lender to see if an agreement can be reached as to a foreclosure by market sale. If the homeowner does not respond to the notice within the 60 day period, the lender is free to proceed with normal foreclosure proceedings, after filing an affidavit of compliance with the notice provisions.

If the homeowner does give notice to the lender of electing to proceed with negotiations with the lender as to the possibility of foreclosure by market sale, the homeowner and lender discuss the mortgage situation to see if agreement can be reached between the parties as to how to proceed.  If, at any point, the lender finds anything unacceptable in the pre-foreclosure process, it may file an affidavit with the court to that effect, and the lender may then proceed with a regular foreclosure.

If the parties agree to proceed with pursuing a mutually acceptable foreclosure by market sale, the Act provides a process to go through, which starts with the lender having a written appraisal of the fair market value of the Property performed, and then both parties agreeing to a listing agreement. If, after listing, the homeowner receives an offer to purchase the Property that is mutually acceptable to both parties, the homeowner executes a contract for sale with the purchaser which is contingent upon completion of the foreclosure by market sale process in the Act. This additional process involves the lender commencing a foreclosure action, and then filing a Motion For Judgment of Foreclosure By Market Sale.  The court appoints a person to make the sale.  As part of the judgment, the court sets “right of first refusal” law days for subordinate lien holders. This gives a subordinate lien holder a right to purchase the property at the price in the purchase and sale contract, in inverse order of priority. The person appointed by the court makes the sale of the Property. The proceeds of the sale are brought into court and, if not sufficient to pay the full amount of any mortgage or lien foreclosed, the court may render a deficiency judgment against any party liable.

From a lenders point of view, it is difficult to see what advantage this new option would have as compared with the existing remedies of strict foreclosure or foreclosure by sale.  There is the question of how long the listing period would extend.  There is no guaranty of receiving any acceptable offer, especially because buyers will be aware that this is a foreclosure market sale, and so will not have an incentive to bid a high price. This process can potentially turn out to be time wasted for the lender. The lender may well have to start the regular foreclosure process from the beginning after all the time spent on the foreclosure by market sale procedure.

From a homeowners’ point of view, the new Act provides an opportunity to use the foreclosure law to obtain some possibly significant extra time before the entry of a judgment of foreclosure without paying the mortgage, and then requiring the lender start a standard foreclosure. This means extra time for a defaulting homeowner at no cost. However, the homeowner must also be aware that the lender can opt out of the process at any point 60 days after giving the notice required by the Act.

Posted in Foreclosures, Real Estate |

$800,000 Will Buy You a Whole Town

26
October
2014

If you have $800,000 just lying around, you could find yourself the owner of a whole town.

That’s right, a town.

If you’ve never heard of Johnsonville, Connecticut, don’t be too surprised. It has essentially been a ghost town since 1994, but before that, it had been everything from a movie set, to a textile mill, and even a theme park.

The origins of Johnsonville stretch back to 1830, when the town was slowly formed around a textile mill, mostly used for making twine. It grew and expanded over the next 130 years until roughly 1960, when it was purchased by Ray Schmitt, famous aerospace millionaire.

Ray ended up turning the town into a theme park, complete with all the old buildings as well as some of his own that he had brought into town, such as a chapel and small stables. His theme park suffered a few fires over the years, but it stayed open until about 1994, when Schmitt got into some arguments with nearby officials, and it was shuttered for good.

Since then there has been a movie filmed there, as well as a music video by hit-factory Billy Joel, but otherwise it has gone completely unused.

The current owners are a hotel development company who purchased it back in 2008, and were unable to sell it for just shy of $3 million last year. They have since lowered their expectations, in an attempt to get rid of the property.

If you have $800,000 and have always dreamed of making yourself mayor, this could be the business opportunity of a lifetime.

Source: http://www.businessinsider.com/connecticut-ghost-town-on-sale-for-800k-2014-10

Posted in Buy a Business |

How Do I Know When to Sell My Business?

19
October
2014

In this blog, we have talked about many of the different aspects around selling a business, such as how to get started, good first steps to take, where to start looking for buyers, etc.

One very important question we have not covered yet is knowing when to sell your business. Timing can be crucially important, easily as important as any other factor. It’s not an easy problem to solve, though.

Take the following scenarios, for example:

  • Business 1 has been around for a decade, and has been moderately successful for years. Lately, though, things have slowed down. Either the market has shifted, the owner has lost steam, or the slow inevitable changing of the tides has caused clients to slip away one-by-one. No matter what the cause, the business has begun to slowly fade. In this case, it might be time to find some new blood to re-invigorate the business before it declines too far.
  • Business 2 has hit some hard financial times recently (perhaps due to a temporary market slump), and has been slowly piling on debt after debt trying to stay afloat. The owner has likely been pumping some of their own money in to keep the doors open. In this case, rather than let the business potentially take everyone down with it, perhaps start looking for someone with the patience and finances to ride out the slump, or some guru with the experience to pull it back from the clutches of death.
  • Business 3 has gone through some slumps and slowdowns, but has turned the corner to profitability. This may seem like the worst time to sell a business, but there is often a lot more going on behind the scenes than just the accounting sheets. Is the owner’s heart still in it? If not, might be time to change owners. Is the market inherently cyclical? If so, it might be time to look for a buyer while the market is hot.

Regardless of the circumstances of the business, there is always a right time to sell a business. It may be hard to spot, but if you are ever curious, do not hesitate to get in touch with a skilled business attorney. They will be able to help you understand the current market, the value of your business, and any extenuating circumstances they can find.

Posted in Sale of Business |

Why Buy a Business Instead of Starting My Own?

12
October
2014

For most individuals, the dream of forming and running a successful business from the ground up is a life-long dream.

However, just like many dreams, it can be immensely difficult, even impossible, to accomplish.

In business, as in many things, it is often much, much easier to come in after all the hard ground work has been done and merely take over the reins. We are talking here, of course, about buying a new business rather than starting your own.

Here are a few benefits to existing businesses that people don’t often think about:

  • Inventory and equipment – A lot more equipment goes into starting a business than you might think. There are computers, desks, chairs, tables, TVs, storage racks, decorations, kitchen equipment, production machinery, etc. A business already having the equipment it needs is a massive benefit. Inventory is crucial as well; not only having the inventory itself, but having established chains of procuring more inventory. Relationships like that can take a lot of work to build up for a brand new business.
  • Location – Finding a good location is never easy. It is one of the main reasons that many new businesses fail. If you have a storefront, or any building frequented by customers, having a good location can be one of the best decisions you make.
  • Employees and customers – Establishing relationships as a new business is never easy. Whether it be acquiring good, skilled employees, or forming and growing a good customer base, brand new startups are often looked at with a degree of skepticism. Good employees and good customers in a relatively new business are worth their weight in gold.

And last, but certainly not least:

  • History – Individuals getting into forming their own company often have false expectations of how much money they will be making. It is not uncommon for startups to not make any meaningful profits until their second year. It’s even fairly common for startups to fail in the first year. If a business you’re looking at has a track record of financial statements and tax returns for you and your attorney to look at, the decision to buy can quickly become a no-brainer.

If you ever have questions about buying or selling a business, get in touch with a skilled business attorney today. They know the markets, and can help you realize your dreams.

Posted in Business Formation, Buy a Business |

Selling My Business: How Focused Should I Be on Profitability?

05
October
2014

When you’ve made the decision to sell your business, there are quite a few things that need to be done in order to maximize your selling price. Most of them revolve around making the decision as easy as possible for your prospective buyer, and chief among those is making your business look as profitable as possible.

Now, it’s not uncommon for individuals with their own startup business to funnel certain personal expenses through the business, or to include certain discretionary expenses, but that is one of the first things that should slow down or stop once you have made the decision to sell.

You want your business to seem as lean and lithe as possible, and since profitability is the most important factor for an interested buyer, cutting out small fees can add up to a big difference over time. A good rule to follow is that a buyer will want to see 2 years of financial records, and if you can show profitability (and optimally, growth) over a 2-year period, with some repeat and loyal customers, you shouldn’t have too hard a time finding someone to make a reasonable offer on your business.

Going along with profitability, if your business is in need of a little fixing up, it is very important that you do the fixing yourself, even if they’re realistically inconsequential fixes. It can be very similar to selling a house, where walls that need nothing more than a fresh coat of paint can scare away buyers, or get you low-ball offers.

The road to streamlined profitability can undeniably be a long one, but the sooner you can start taking steps, the better. The value of your business sale might depend on it.

Obviously, if you ever have questions about buying or selling a business, please get in touch with a skilled business attorney today. They will be able to look at your particular case, and offer qualified advice based on their experience.

Posted in Sale of Business |