Important:

Our office is currently closed, but we continue to provide legal services by working remotely.

In light of Governor Wolf’s emergency declaration and current recommendations our office is currently closed.  Our attorneys and staff continue to work remotely, however, and we can assure you they are set up to respond to your calls, emails and all communications.  For more details on AMM operations during this time, read our full update.  

Thank you for your understanding, and please take care.

 

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), signed into law on March 27, 2020, provides $349 Billion in SBA 7(a) forgivable loans to businesses and nonprofits with fewer than 500 employees [see endnote 1), including sole proprietors, the self-employed and independent contractors.  Known as the Paycheck Protection Program (PPP), the maximum available loan amount is 2.5 times your average total monthly payroll costs, capped at $100,000 per employee on an annualized basis [see endnote 2].  The loan proceeds can be used for any authorized business purpose, but to the extent used to pay payroll costs, healthcare benefits, eligible rent or mortgage interest payments and utility costs over an eight (8) week period from the date the loan is made, the loan can be forgiven (the lender is paid by the SBA). There is no collateral and no personal guarantees required.  There is no requirement regarding exhausting other available credit.  The SBA pays the lender all loan origination fees and has waived many of its otherwise onerous requirements.  To the extent any loan balance is not forgiven, the interest rate will be fixed at the time of the loan somewhere between 0.50% and 4.0% [see endnote 3], amortized over up to 10 years, payable over two (2) years, with all payments deferred for six (6) months.  There is no prepayment penalty.  The program is only available through June 30, 2020, but funds are limited, so don’t wait.  For more detailed information, see below and PPP Information Sheet.

Published in AMM Blog

With individuals residing in Allegheny County, Bucks County, Chester County, Delaware County, Monroe County, Montgomery County, and Philadelphia County ordered to stay at home with only certain limited exceptions, and non-life sustaining businesses ordered to close, business owners struggle with what to do next.  The full text of the Governor’s order and other related information can be found here.  While there are many unanswered questions and additional guidance is continually being issued, business owners do have resources available to them.  

Published in AMM Blog

Business interruption insurance covers a business’ losses resulting from a direct physical loss or damage to property. Accordingly, coverage under such a policy generally will not trigger unless there is a direct physical loss to the business’s property. In some circumstances, loss of income due to a disaster-related closing of a business’ physical location is covered.

Published in AMM Blog

The coronavirus pandemic has already caused massive financial impacts across nearly every industry in the Commonwealth of Pennsylvania.  Unemployment claims have skyrocketed, essentially all physical business locations are closed, and industry is struggling to convert to remote operations.  Unfortunately, it appears the financial crisis is just beginning.  

Published in AMM Blog


Pennsylvania Business owners have probably heard that Governor Tom Wolf ordered that all "non-life-sustaining" businesses in Pennsylvania must close their physical locations to slow the spread of COVID-19. This order went into effect last evening. You may be wondering whether your business is “life-sustaining” and may stay open. There is little guidance from the Governor’s office, other than the chart published by the Governor

Published in AMM Blog

As our collective understanding of COVID-19’s national (and global) impact continues to develop, many business owners may wonder whether their commercial general liability (CGL) policies can provide coverage against any claims associated with COVID-19, or any other infectious disease.

Published in AMM Blog

The impact of the COVID-19 global pandemic is rippling through the United States economy.  Mass cancellations, closures, travel restrictions, containment zones and school closures at every level leave many business relationships interrupted.  Goods and services previously planned for and anticipated are no longer required.  Buyers are scrambling to cancel.  The grocery store shelves are empty and the markets experienced perhaps the most volatile week in history.  We are entering a period of great uncertainty.  

Published in AMM Blog
Friday, 06 March 2020 15:53

Business Implications of Divorce

When a business owner gets divorced, the business is often the major asset subject to distribution.  Accordingly, the business and its’ ongoing operations are almost always implicated in the divorce.  In most cases that I see, the business is a small business with  one owner or a few owners.  In the best case scenario, the business owners have planned in advance for situations that arise in a divorce through a Shareholders Agreement, Prenuptial Agreements and/or Postnuptial Agreements.  Hopefully, the parties’ respective family law and business law attorneys can work together to best protect the business owner to ensure as smooth a transition as possible.  Hopefully, the relevant agreements have set forth a valuation formula which can be upheld at law  for purposes of the divorce.  Counsel can also work together to insure that income is clearly defined and reported so that support is less contentious.  Additionally, advance planning can be used to address the below issues so that a divorce does not mean the end to the business.  While advance planning is not a guarantee, it will provide additional protections to the business owner.

A divorce can impact internal and external business relationships, support (between spouses and child support), equitable distribution (division of marital property) and business control.  In terms of business relationships, banking relationships can come into play, especially if the spouse is a personal guarantee of the loan.  It is often not easy or possible to have the spouse removed from the guarantee.  The spouse may also have a role in the business and it may not be feasible for them to remain involved.  For example, in cases where the spouse is client facing, a delicate balance will be necessary to transition the spouse out of the business without negatively impacting the business.  This can be a challenge if the divorce is acrimonious.  Finally, the roles of the parties within the business may create sustainability issues going forward.  In some cases, one spouse has a particular talent (i.e. software development, marketing creativity or scientific knowledge) which cannot be easily replaced and without which the business may not be able to survive.  Such issues impact valuation but also succession and strategy on distribution of assets.  

As for support, when a business owner is a party to a support action, whether for support for a spouse or for a child, calculating income can be challenging.  The definition of income for purposes of determining support is very broad and is not the same as taxable income.  There can be practical issues in obtaining information and documents which reflect the income.  Legal issues can also arise, such as whether income is being reported or if the court can compel income or retained earnings to be distributed from the business to the owner to pay support.

In equitable distribution, the business must be valued so that division of the assets can occur.  Business control also comes into play.  It is unusual for parties to retain joint ownership or for the non-business owner spouse to receive shares of the business so creativity and/or structured payments are often necessary unless there is enough cash reserved for an outright payment.  The payout can cause a financial strain for the business.  

To best protect a business in the event of a divorce of the business owner, it is advisable for business owners to have advance planning through the mechanisms listed above.  While not a guarantee, it will place the business owner spouse in a much better position than ignoring these issues all together.

Published in AMM Blog

As a business lawyer, I have spent years counseling small to mid-sized companies across a wide range of industries.  I have advised clients on routine to complex business legal issues that arise during the start-up stage through operation and growth stages, and have structured many exit strategies and created successful succession plans in various ownership documents.  What I love best about providing sound legal guidance to business owners through the life cycle of their business is helping them solve issues that arise both from a legal perspective and also from a financial perspective.  Helping clients navigate through contractual, employment, finance, IP protection, and other daily issues so they can focus on achieving their goals of growth, maximization of profits, and sustainability, all while minimizing their potential for risk and exposure is a vital objective in my practice. 

I have recently been invited to participate for the next several weeks as an advisor in an exciting new local event – The Spark Bowl.  Co-sponsored by Delaware Valley University, it’s Small Business and Entrepreneurship Center and the Central Bucks Chamber of Commerce, this event is a local competition aimed at fostering innovation, growth, and entrepreneurship.   At the First Annual Spark Bowl event to be held on December 11th, students and local entrepreneurs in and around Bucks County will “pitch” their businesses plans to Spark’s judges, who will select a winner who will receive prizes and benefits to include monetary funding as well as access to expert advisors.  The contest will be judged by experienced investors who have a desire to support innovation and economic growth and prosperity within the local community.  As part of DelVal’s experiential learning program, DVU student teams will work with final contestants to prepare for the competition under the guidance of DelVal faculty and SBEC advisors.  Professor William Viel of DVU’s Business and Information Management Department is the Director of the SBEC.  It is quite a valuable resource to this community to have such an incubator right here in Central Bucks. Please click here to learn more about The Spark Bowl at Delaware Valley University.

After many years of working with business owners, some who were successful, and some who were not, it seems evident that the best predicator of sustainable business growth and success is: planning by asking the right questions up-front; creating detailed business plans and product or service models; determining the expected demand for their product or service in a low or highly competitive market; understanding both traditional and non-traditional financing alternatives; putting together the right team of professionals to help them produce, deliver and promote their business and its products/services; dealing with operational challenges and various levels of legal compliance properly, all while being willing to assess weaknesses and promote strengths.

The Spark Bowl has inspired me to remind my clients to think about why they are doing what they are doing, as they work through the day-to-day challenges (legal and otherwise) of operating and sustaining a business they built and love.

Good Luck to all the participants on December 11th!     

Published in AMM Blog

Many an article or blog post concerns minority shareholder rights, shareholder oppression or shareholder “freeze out”.  As business and litigation lawyers, we are always mindful of the rights between and among business owners, what can and cannot be done in furtherance of those rights and the legal mechanisms applicable to the exercise of those rights.  We frequently write on the strategies available to a minority shareholder such as examination of books and records, claims of breach of fiduciary duty and the potential for appointment of a corporate receiver or custodian. 

This is not that article. 

The fact is, being a minority shareholder means that, by definition, there are often things you simply cannot control.  A shareholder or member in a business entity who possesses less than a controlling stake must have reasonable expectations as to the rights attendant to such ownership and understand the limits of such rights so as to make informed decisions concerning the investment of time, energy and money in pursuit of the collective enterprise.    

Let’s start with who owns the remaining shares in the company.  In the absence of an agreement to the contrary, the majority shareholder is free to transfer the majority (said another way; controlling) interest in the company without the consent of the minority.  A transaction can result in a change in control such that the minority shareholder suddenly works for someone entirely new.  While a minority shareholder can enjoy “dissenter’s rights”, such rights are applicable in very narrow situations specified by statute.   In fact, in the absence of a prohibition, the stock in a business entity is readily transferrable, just like on an exchange, if a buyer and/or seller can be identified.

Internally, a minority shareholder can find it difficult to impact the direction of the business.  Depending on the by-laws of the entity and, frankly, the will of the majority, a minority shareholder may or may not have a voice on the board of directors and thus may not possess a vote on material decisions such as the persons who will fulfill critical roles in the executive branch of the business such as the officers of the corporation. More importantly, a minority shareholder may not have input on the financial operations of the company including distributions, financing arrangements, major purchases of inventory, equipment or talent.  All of which can dramatically affect the annual bottom line.

Even employment is not guaranteed to a minority in interest.  In the absence of an agreement to the contrary, the employment of a minority shareholder may simply be at will in the same way as the sales force, the administrative assistants or the custodian.  Certainly, terminating a minority’s employment could be one of the factors argued in a freeze out, but in the absence of other factors, termination of employment alone may not give rise to a cause of action.  Certain courts have suggested continued employment may be implicit in a “founder” but those situations are few and far between and a plaintiff/minority shareholder must be prepared with more to argue than the end of employment if freeze out is alleged. 

In business, like politics, being in the minority means sometimes you are powerless to immediately change the course of the company.  Sometimes, a group of shareholders can band together to pool their collective influence for their mutual benefit.  Other times, the best strategy is to become the majority even when the acquisition of additional shares comes at an unnecessary or unanticipated cost.  Under any circumstances, rights afforded to the majority are not constrained solely because a minority shareholder does not agree with a particular course of action.  

As a litigator, I am often contacted by minority shareholders who are frustrated by their lack of control or influence.  While the law offers certain protection for holders of such minority interests, those remedies are factually limited and are often unsatisfactory even if granted in full after significant expense in litigation.  Certainly an appropriate agreement outlining the respective rights and obligations can change the analysis.  Business owners should consider, and plan for, what rights their stake in the company provides.          

Published in AMM Blog
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