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  • Minnesota’s New LLC Act – Increases Value of LLC Operating Agreement

    Minnesota’s New LLC Act – Increases Value of Operating Agreement

    Minnesota’s New LLC Act – Increases Value of Operating Agreement Every small business has to adapt and change to succeed. Changing often brings friction among co-owners that can lead to expensive lawsuits. Before Minnesota passed its revised LLC Act, effective in 2015, the dissenters’ rights provision was a tool where members that opposed a major change such as a merger could assert [...]

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  • Non compete agreements and enforcement in North Dakota

    Non Compete Agreements

    Forum Selection Clause Unenforceable in North Dakota for Purposes of Enforcing Non-Compete Agreement North Dakota law has long prohibited non-compete agreements in employment contracts. See N.D.C.C. §9-08-06. Companies that employ North Dakota residents have tried to work around this law by, for example, for out-of-state companies, entering employment contracts applying the laws of their home [...]

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  • shareholder termination | shareholder rights | shareholder fraud | shareholder reasonable expectations | derivation action | shareholder oppression | derivative lawsuit | usurping | direct action | causes of action for shareholder lawsuit

    What rights do you have as a shareholder when the person or people in control of the company engage in deception, fraud or theft? In the shareholder context, this question relates to the concept of breach of fiduciary duty. A fiduciary duty is a responsibility arising out of special relationships between certain parties. It is the highest duty implied by law and requires the fiduciary to act in[...]

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    Derivative Action | Shareholder lawsuit | misappropriation company or partnership assets

    Can you sue a company officer in North Dakota for mismanaging the company? One issue that often confronts shareholders is when a controlling officer or manager of the company mismanages company business or misappropriates company assets. In general, such acts represent harm to the business rather than the individual shareholders or members. To bring a legal action in North Dakota, and [...]

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    An oppressed corporate shareholder in South Dakota has substantial rights. Co-owning a business with other family members or business partners can be incredibly rewarding but it can also be the source of some of the costliest conflicts. Often, shareholders or co-owners with a minority stake in the company can be treated unfairly by shareholders with a controlling position with the company. We [...]

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    “USURP” CORPORATE OPPORTUNITY?

    WHAT DOES IT MEAN TO “USURP” A CORPORATE OPPORTUNITY? The term “usurp” in the context of business law means: “to take or make use of without right” according to the Merriam-Webster online dictionary. As we have discussed in our other postings, company directors, shareholder and officers have various fiduciary duties to one another and to the company. One of these duties is the [...]

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    Can I as a shareholder sue my own company?

    Can I start a lawsuit to enforce my rights as a shareholder in my company? Can I start a shareholder lawsuit? If there is a cause of action, yes, you can start a shareholder lawsuit to enforce your rights against other shareholders or the company. You can also potentially start a lawsuit on behalf of the company itself, to protect it from mishandling of funds, self-dealing or corporate waste. [...]

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    Shareholder Termination | Shareholder Rights | Reasonable Expectations

    Can a company fire a shareholder? Nothing starts a shareholder dispute as often as terminating a shareholder from their own company. The terminated shareholder is often disgruntled and confused. “Can they do this?” and “What are my rights?” are questions that often arise. For the company, often there is confusion about what duties remain to the terminated shareholder. On the question [...]

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    Shareholders in Minnesota and North Dakota have a right to company information and records Shareholder oppression is when shareholders that are in control of a company engage in conduct that is unfair to shareholders who are not in control. The same applies to members of a limited liability company (LLC) or partners in a partnership. One of the most common oppression tactics is to withhold [...]

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    What type of conflict of interest a director of a corporation can have to breach his fiduciary duty? Directors and/or officers who take responsibility for dissolving a company can be tempted to use company funds to repay debts to themselves as opposed to other creditors. This can expose those responsible to serious potential personal liability if the company is insolvent or on the verge of [...]

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    What is corporate veil in regards to corporate definition? Lawyers are all typically familiar with the concept of the “corporate veil.” The corporate veil refers to the separation between a person who owns stock in a corporation and the corporation itself. With a corporate entity, ordinarily the person who owns stock in the company is not personally liable for the debts of the company. Like [...]

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    What is tortious interference? One claim that sometimes comes up in the business context is called tortious interference with economic advantage.[1] This is a claim against someone for wrongfully taking a business opportunity away from the victim. It comes up often against former employees or co-owners who sidetrack business opportunities that have come to their attention while they worked for [...]

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    Can I as a Shareholder appeal in courts of appeal to get a reasonable expectation? No, if you were to look at a newly released decision by the Minnesota Court of Appeals, a reminder that litigants cannot even count on the appeals process or reasonable expectation to get things right. See Gates, et al. v. Macken, et al., Court of Appeals Case No. A15-1289 (May 9, 2016) (“Gates v. Macken”). [...]

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    What is Articles of Organization for an LLC? Forming a business entity has become incredibly easy nowadays. At the Minnesota Secretary of State's Office, all it takes is 5 minutes filling out a one-page form and a filing fee. The form is called Articles of Organization for an LLC or Articles of Incorporation for a corporation. What is the difference between an organizer and owner of an LLC? The[...]

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    What is fiduciary duty relevance to shareholders? In North Dakota, shareholders (or members) of closely held corporations (or llcs) owe each other a fiduciary duty of utmost loyalty and good faith. See Schumacher v. Schumacher, 469 N.W.2d 793, 797 (N.D. 1991). The duty protects shareholders from oppressive or unfair tactics by other shareholders.  Breach of this duty gives rise to a breach of [...]

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  • AN OVERVIEW You are co-owner of a successful business, but your business partner and good friend has run into hard times. His life is upside down and he is in the middle of a nasty divorce and desperate for money. Because his personal distractions have kept him away from the business, he has taken advances against future earnings without consulting you, and you believe he has misused his position[...]

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  • Bringing or defending a lawsuit in federal or state district courts is an outrageously expensive endeavor. Even simple cases in state district courts will likely costs more than $25,000.00 in attorney's fees to have a trial. In real estate transactions and increasingly in many other areas, buyers and sellers commonly sign an agreement to arbitrate disputes not through the courts but instead [...]

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  • We are frequently approached by shareholders or members of small businesses struggling to figure out what duties they have to the company or whether others involved with the company have run afoul of such duties. Typical issues include: Mismanagement that has resulted in serious liability; Management has taken business opportunities that belonged to the company; There has been [...]

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  • So often in business litigation we see disputes regarding the  use or disclosure of so called “confidential and/or proprietary” information or  “trade secrets.” In a typical scenario, a former employee, officer or partner  leaves his or her old company “ABC Electronics” and forms a new competing  venture, “XYZ Electronics.” Sometimes though, it may be a potential business  [...]

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  • One question we encounter often in our practice from businesses and employees is whether the non-compete agreements they have signed can be enforced. The non-compete agreements (also known as covenants not to compete or non-solicitation agreements, among other things) at issue often prohibit former employees, contractors or owners from competing with a business following the termination of their [...]

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  • Many recent media reports have covered criminal prosecutions involving alleged ‘equity stripping scams'. But when you take a closer look at the circumstances of each case, it becomes much more difficult to separate the victim from the villain. The typical case involves a homeowner who is down on his or her luck and behind on his or her mortgage payments. The homeowner's mortgage lender has [...]

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