Complex Corporate Governance Issues Often Require Legal Advice and Expertise

Stuart Pachman CORPORATE GOVERNANCE ISSUES—PROBLEMS with the set of processes, customs, policies, laws and institutions affecting the way a corporation or company is directed, administered or controlled— often require legal advice and expertise. In this section, COMMERCE features success stories about how law firms helped their clients with these kinds of challenges.

Q.How did your law firm help a New Jersey client with a corporate governance issue? What was the problem and how did you help solve it?

Governance or control is important to small as well as large entities. When two partners separated without the help of counsel, their accountant dissolved their business corporation, formed a new corporation with a single shareholder and formed a single member LLC intended for the real estate. No documents recorded or explained the transaction. When deficiencies were discovered by a government agency, we were consulted to organize the new entities and repose unquestioned ownership in the remaining individual. We prepared a written agreement, “nunc pro tunc,” in which, in consideration of our client’s assuming the real estate mortgage payments, the departing partner formally acknowledged: (1) that he had surrendered his interest in the old corporation and the real estate partnership and (2) that he had no interest in the new corporation or LLC. We obtained the lending bank’s consent to transfer the property to the LLC, negotiated a refinance of the mortgage and prepared a single-member operating agreement for the LLC. A third individual had acquired some shares in the new corporation. We prepared a written organizational consent, issued stock certificates and prepared a shareholders agreement. By clearly showing ownership and governance authority, the client’s documents are presentable to any agency and avoid potential litigation among the three individuals.