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Business Law Currents: JVs & Corporate Acquisitions Ideas

I was involved in the creation and
publication of two articles for Business Law Currents during May.  The first article, “Joint Ventures: Six Key
Questions for Successful Management and Operations”, built on early coverage of
various issues to discuss with clients contemplating a new joint venture
arrangement.  The second article was the first of
what will hopefully be an ongoing bi-monthly series on major development
affecting mergers, acquisitions and divestitures. 


Hit the Ground Running

Assume that you’ve just joined the management team at an emerging company.  One of the first things that you’ll want to do is obtain as much information as you can about the business and operations of the company so that you’ll be able to start making a contribution as quickly as possible.  While you’ll eventually want to sit down and speak with all of the key executives, managers and employees, as well as the company’s major outside business partners—a topic we will cover in detail in future posts—the best way to get started is to obtain and review certain basic documents before you actually arrive onsite.  The information in these documents can be used for initial issue-spotting and can also serve as the foundation for asking the right questions in subsequent interviews and understanding how the first projects that you’ll be working on fit into the overall business plan of the company.


The range of documents that you should review will vary depending on whether the company is a reporting company and thus required to make certain information publicly available in periodic filings with the Securities and Exchange Commission (“SEC”).  Assuming that is the case, you should ask for, or download on your own from the SEC website or a commercial service, the following documents:

  • The reports on Forms 10-K, 10-Q and 8-K filed by the company over the last three years (or such shorter period that the company was required to file such reports);
  • The company’s S-1 registration statement if the company completed its initial public offering within the last three years;
  • The proxy statements filed by the company, and disseminated to shareholders, over the last three years (or such shorter period that the company was required to makes such filings); and
  • The contracts and other documents that have been filed as exhibits to the company’s SEC filings over the last five years (or such shorter period that the company was required to make such filings).

While you should read everything closely there are certain disclosures that should be carefully reviewed—the description of the company’s business and the risk factors associated with the business, the notes to the company’s financial statements and the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”); the disclosures made in the Form 8-K reports; and projections of future performance and anything else that might be deemed a “forward-looking statement”.


If the company is not subject to the reporting requirements you should ask for copies of comparable documents such as the business plan or offering circular distributed to potential investors and other formal communications to investors and shareholders over the last two or three years that include material information regarding the company.  Material contracts for a privately-held company will need to be obtained directly from the legal department and/or other senior managers of each of the main functional departments (e.g., marketing, sales, manufacturing, R&D, IT etc.).  When requesting such information take note of how long it takes to receive the contracts and where they are maintained within the company since you may want to suggest changes in the records retention procedures down the road.  When asking for contracts you should apply and explain the same standard of materiality that would be used if the company was required to file the documents with the SEC and that means you should obtain, at a minimum, copies of the charter documents of the company (i.e., articles and bylaws with all amendments); all employment-related agreements, including stock option plans and agreements and change-of-control agreements with senior executives; major real and personal property leases; major contracts with outside business partners (e.g., contracts relating to R&D, manufacturing and sales/distribution); and pension and benefits plans.  Stock records, or at least a list of the shareholders and option holders (including the number of shares owned or subject to option), should also be obtained.


Contracts, documents and policies from several other areas should also be obtained regardless of the reporting status of the company.  First of all, you should request and obtain copies of “boilerplate” contracts and terms and conditions that are continuously used in business relationships with employees, vendors and customers.  For example, make sure you look at the company’s employee confidentiality and assignment of inventions agreement and the company’s personnel handbook and policies.  Also review the company’s standard terms and conditions of sale and purchase on its invoices and purchase orders.  Second, make sure you review the minutes of the board of directors and the charters of each of the committees established by the board, particularly the audit and corporate governance committees. You should also seek and obtain background information on each of the directors and senior managers including resumes and, the case of management, a timeline of their progress and advancement within the company. Third, ask for copies of communications with the company’s outside auditors regarding legal matters over the last few years. Finally, make sure you review the company’s recent press releases and copies of promotional materials that the company regularly disseminates to the public regarding its products and services.


As noted above, the best idea is to review all of these documents before you begin work and you should allow sufficient time to complete the full review and, if possible, prepare your own index of the documents and summary of important recent developments relating to the business and organization of the company.  For example, you should try and develop a list that includes, in chronological order, major contracts, product introductions and personnel changes.  All of this takes a lot of time and concentration and some of what you learn will not be immediately useful to you in your early days on the job; however, by doing your homework early you’ll eventually be way ahead of the game and in a position to demonstrate knowledge and value to your colleagues.


Law & Technology Blog on Legal Solutions: COPPA Compliance Programs

On the Law &
Technology Blog on Legal Solutions I completed my series on the upcoming
changes to the rules promulgated under the Children’s Online Privacy Protection
Act (COPPA) with an article discussing the key elements of a COPPA Rule Compliance Program. 


Understanding Organizational Structure

Senior managers and those working with them on organizational design cannot rely on a single “best organizational structure” for all situations and must instead search for a unique structure that allows them to best control their external environment and quickly and effectively respond to contingencies that have been identified in advance.  This process can be difficult and time-consuming and should begin with making sure that the process of designing the organizational structure is understood.  The questions in this report can serve as a means of getting started.


Developing an Effective Antiboycott Law Compliance Policy

While sometimes neglected,
antiboycott laws should be an important consideration in any company’s global
compliance policies and procedures.  To
learn more see my recent post on Developing an Effective Antiboycott Law Compliance
Policy on FindLaw Corporate Counsel.