Friday, 25 May 2018

Domestic Violence Lawyer

As a criminal lawyer, I’ve heard that a topic that used to be “kept in the family” or swept under the rug, domestic violence has been more prevalent in the news and media today than ever before. As a result, a lot of people are wondering how domestic violence is legally defined, where victims can find emotional and legal help, and what can be done to prevent it in the future.

Domestic Violence Lawyer

This section provides helpful information on a variety of domestic violence issues, starting with identifying early warning signs and symptoms of domestic violence. Additionally, there are articles on the legal action and practical steps necessary to protect yourself from physical, sexual, emotional, or financial abuse. You’ll also find information on related domestic violence topics – such as stalking and harassment — and links to state-specific domestic violence laws and resources.

Domestic Violence, Defined

While one of the top health concerns in our country today, many people lack a full understanding of the depth and scope of domestic violence or how it can even be identified. Victims may not realize that what is being inflicted upon them is, in fact, domestic violence, and therefore won’t know to take action against their abusers. At the same time, friends and loved ones of victims may not be able to help if they don’t understand what domestic violence looks like.

The Office on Violence Against Women defines domestic violence as a pattern of abusive behavior in any relationship that’s used by one partner to gain or maintain control over another intimate partner. This behavior can include physical, sexual, emotional, psychological, and even economic abuse. Stalking and threats may be classified as domestic violence as well. And although we normally think of battered wives in the context of domestic abuse, non-married partners, family members, children, and other cohabitants can also be victims of domestic violence.

Preventing and Punishing Domestic Violence

Every state has criminal statutes prohibiting domestic abuse. Whereas law enforcement typically turned a blind eye to domestic violence cases in the past, new laws requiring arrests and mandating harsher penalties have led to an increased rate of response and prosecution. In addition, tort law allows victims of domestic violence to sue their abusers in civil court, and possibly recover damages for their physical, economic, and emotional injuries. Victims can also file for orders of protection, more commonly known as restraining orders, to prevent further abuse.

These remedies, however, are normally only available after an incident of domestic violence has occurred. It’s up to us to stop domestic abuse before it starts. Domestic violence organizations can provide resources on how to identify the warning signs of abuse and how to exit a potentially dangerous relationship. There’s also information on how to know if a neighbor, co-worker, friend, or family member is in a possibly harmful domestic scenario and, if so, how you can help.

Legal Help for Domestic Violence

First and foremost, if you feel unsafe in your home or relationship, you can always call 911. In addition, an experienced family law or criminal law attorney can assist you with everything from talking to the police about a violent incident to filing for protective orders, separation or divorce, and a civil lawsuit.

Free Consultation with a Lawyer in Utah

When you need legal help related to domestic violence, call for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Thursday, 24 May 2018

Gift or Loan Prior to Bankruptcy

When you’re struggling with debt, it’s natural to turn to friends and family for help. They know you and they trust you, making it simpler and easier to seek financial aid from them than from a bank. If your financial difficulties continue and you decide to file for bankruptcy protection, what happens to the friends and family members from whom you borrowed?

Gift or Loan Prior to Bankruptcy

Did you sign a promissory note?

The first question when considering money borrowed from family members is whether or not the debtor signed a promissory note. If you signed a promissory note, the money you received will be formally treated as a loan. A promissory note must include information identifying the borrower and the lender. It should specify the amount, the repayment terms, and what will happen if you don’t pay.

If there’s no note, that money may be treated as a gift. While you may feel bound to honor your word to Mom and Dad, the court wants a legal promissory note to mark a loan. Without the formal paperwork, it’s just a gift.

Loans in Bankruptcy: How They Work

If you have signed a promissory note, you’ll need to list the lender as a creditor on your bankruptcy schedules. They’re legally entitled to repayment the same way every other creditor is. They’ll also be treated just like any other creditor.

Most consumers file bankruptcy under either Chapter 7 or Chapter 13. Chapter 7 bankruptcy is a liquidation of your debts. You’ll use state and federal exemptions to protect most, if not all, of your property and the remainder will be sold to pay creditors. All creditors get a proportionate payment, so if Mom and Dad represent 5% of your debts, they’ll get 5% of the proceeds.

Under Chapter 13, the court will take your disposable income for payment of creditors for 3 to 5 years. Your disposable income is determined by taking your actual income and subtracting state and national standards for living expenses. You’ll pay your disposable income to the court and they’ll distribute it proportionally among your creditors.

At the end of both Chapter 7 and Chapter 13, the remainder of your unsecured debts will be discharged, or legally forgiven. You’ll no longer officially owe anything. You may, of course, choose to repay your friends and family on your own after the bankruptcy process.

Gifts in Bankruptcy: How They Work

If there’s no promissory note to mark your loan from friends or family, that money is considered a gift. You’ll have to disclose the gift on your bankruptcy schedules. If you’re the one who gave the gift, you’ll also have to disclose that on your bankruptcy schedules if it’s over a certain dollar amount, depending on the state in which you file.

Cash Gift in Chapter 7

What happens to a gift in bankruptcy depends on the timing. If you received the gift before you filed, the court will take it into account when determining what you can pay. If you received the gift after you filed for Chapter 7, the gift won’t be included in your bankruptcy proceeding.

Cash Gift in Chapter 13

If you received the gift during the Chapter 13 process, the answer is uncertain. If the gift happens before you file, you may be expected to pay more to your creditors. If you receive the gift between the date that you filed your case and the date that your repayment plan is confirmed by the court (that can take several months), the trustee in charge of your case may argue that you now have more disposable income and can pay more. If you receive the gift after confirmation of your payment plan, you’re more likely to be able to keep the gift without increasing your payments.

Note that if you’ve given any significant gifts before filing for bankruptcy, the trustee may be able to claw that money back. The court wants to avoid fraudulent transfers — ways of getting money out of the bankruptcy estate in order to keep it safe from creditors. That doesn’t have to be your intention in giving the gift; just giving cash to someone for a holiday or special occasion is enough to trigger a clawback. You may also trigger a clawback if you repay a loan from a friend or family member (with or without a promissory note) before you file for bankruptcy. That’s called a “preferential payment,” meaning that you chose to repay one creditor over another.

The court wants to ensure that all creditors are treated equally in the bankruptcy process, so that payment to Mom and Dad is going to get pulled.

Legal Documentation is Best Practice

Your family and friends are there to help you in times of need and you’re there to help them. Unfortunately, the legal system doesn’t care about familial or friendship bonds. The bankruptcy courts want to see formal legal documentation of your financial situation. So, whether you’re borrowing from or lending to someone close to you, consider creating a proper promissory note.

You can download templates online for free and it can save you a lot of trouble in the bankruptcy court. It’s also a good idea to have a formal note for the sake of your relationship with the other party. You can discuss the terms in advance and have a real plan in place for repayment. You won’t be left wondering if Cousin Eddie ever really meant to pay you back that $1,000 or if he’s just taking advantage of you.

If you’re struggling with debt and considering bankruptcy, speak to a local bankruptcy attorney. Bring all your financial documents and be sure to discuss any financial arrangements with friends or family members, whether or not they’re formally recorded in a promissory note. Your attorney can help you determine what will happen to those financial arrangements in the bankruptcy process and can work with you to decide on the best way to deal with your debts.

Free Consultation with a Utah Bankruptcy Lawyer

If you have a bankruptcy question, or need to file a bankruptcy case, call Ascent Law now at (801) 676-5506. Attorneys in our office have filed over a thousand cases. Come in or call in for your free initial consultation. We will help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Wednesday, 23 May 2018

How Bad is Bankruptcy For Your Credit?

What stops people from filing for bankruptcy? Ask a bankruptcy lawyer and you’ll get different answers. Is it fear, pride or a belief that declaring bankruptcy is in some way unethical? If you stopped and asked 10 people on the street for the number one reason not to file bankruptcy, most would mention damage to their credit.

How Bad is Bankruptcy For Your Credit

Bankruptcy in Utah

There is a common public perception that playing the “bankruptcy card” creates a ripple effect that reaches every aspect of your life in a negative way. After all, bankruptcy does show up on your credit report for 10 years and no one wants to start a job interview by discussing a past chapter 7 case. Filing for bankruptcy certainly won’t make it easier to rent an apartment or lock in a good rate on a mortgage. However, it won’t disqualify you from future credit either.

The Toothpaste is Already Out of the Tube

To be sure, filing bankruptcy is not something that is to be entered into lightly, however, there is more than a hint of irony in the reasons people commonly give for not filing bankruptcy. Perhaps the most commonly cited: that bankruptcy will ruin your credit (and by extension your life). Unfortunately, bad credit is a scenario that has already unfolded for a good number of people who find themselves in financial distress. For many people, the biggest reason not to file bankruptcy (damage to credit) has already happened by the time the thought of bankruptcy pops in their head. Maybe a series of financial missteps or the loss of a job have caused charge-offs, liens, foreclosures, missed payments and a whole host of other negative credit events to appear on your credit score, is a bankruptcy really going to make much of a difference?  Sure, bankruptcy will add another negative mark on your credit report, and you’d like to avoid it if possible, but in the long run it may actually give you greater access to credit. Taking your unsecured debts to zero and using the momentum to start over will help you build a stronger credit score. Waiting around with the phone off the hook won’t.

Bankruptcy vs. Other Negative Credit Events

Chapter 7 bankruptcy stays on your credit report for 10 years, whereas a foreclosure will usually stay on your credit report for 7 years. However, don’t assume that foreclosure is preferable to bankruptcy simply because it stays on your credit for a shorter period of time. Many credit counselors report foreclosure as having twice the negative impact on your credit score as a bankruptcy. According to Ray Hooper, Education and Housing Director for the Consumer Credit Counseling Service of Greater Dallas:

“A foreclosure is very serious to mortgage lenders. They’re going look at a foreclosure more seriously than they will a bankruptcy that doesn’t include the house.”

According to FICO estimates, bankruptcy will cause a reduction in the filer’s FICO score of between 130-240 points, whereas a foreclosure, deed in lieu or short sale will cause a reduction in the 85-160 range.

Public Records and Bankruptcy

Tax liens, judgments and bankruptcies are all listed under the “Public Records” section of your credit report. Any reported Public Record will damage you credit, however it’s important to understand that bankruptcy filings don’t have their own section on a credit report. They are lumped in with other government initiated events. If you’ve already had a tax lien or judgment reported on your credit, the negative impact of a bankruptcy will be decreased and the benefits of filing may outweigh the additional credit damage.

Even missing payments on credit card accounts can drop a credit score by 75 points or more. The point is not to make light of the seriousness of a bankruptcy filing, but merely to point out that, viewed in light of a series of negative credit events, bankruptcy becomes more and more attractive when a consumer’s debts have spiraled out of control.

Free Consultation with Bankruptcy Lawyer

If you have a bankruptcy question, or need to file a bankruptcy case, call Ascent Law now at (801) 676-5506. Attorneys in our office have filed over a thousand cases. We can help you now. Come in or call in for your free initial consultation.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Tuesday, 22 May 2018

Step-Parent Adoption Information

Step-Parent Adoption Information

Being a parent is a rewarding, yet difficult job. When you’re a stepparent, the job can present additional challenges as you fill an important niche in a child’s life. Sometimes stepparents chose to further expand their role by adopting their stepchildren, although there are legal hurdles that must be crossed to formalize that relationship. This article will provide answers to some of the most common questions about stepparent adoption, including:

  • The legal requirements needed to complete the process;
  • The duties and rights of the birth parents; and
  • The eligibility of same-sex couple step parents.

I want to adopt my wife’s birth children. How difficult is it to adopt stepchildren?

It is not difficult as other types of child adoption, but there are still steps that must be taken. In most other child adoptions, the court requires home visits and adoption hearings, and there is a long waiting period. Because in a stepparent adoption the parties are related, the courts may remove these requirements in order to speed up the process. The main issue that most stepparents adopting a stepchild face is obtaining consent from the other birth parent.

Do I need consent from the birth parents to adopt my stepchild?

Yes. In all stepparent adoptions, the consent of the other birth parent is required. If that other birth parent’s parental rights have been terminated due to abandonment, neglect, unfitness, or failure to pay child support, however, then that birth parent’s consent is not required.

Getting consent from the other birth parent is often difficult because, in giving consent, that birth parent is giving up all of his or her parental rights. Of course, this means that that birth parent is giving up all parental responsibilities, such as paying child support, as well, so if the birth parent does not have a relationship with the child anyway, the stepparent may have an easier time getting consent. In some cases, the other birth parent may recognize that the stepparent adoption is in the child’s best interest. In those cases, consent is not hard to obtain.

If the other birth parent does not consent, can his or her rights be terminated, anyway?

There are ways to terminate the other birth parent’s parental rights, which would eliminate the requirement of his or her consent. Parental rights can be terminated if you can prove the other parent abandoned the child, is unfit, or is not the biological father (when the other parent is male).

  • How to prove the other birth parent abandoned the child: “Abandonment” means that the parent has not communicated with the child or provided financial support for the child. In most states, if the other birth parent has continuously failed to provide child support or has abandoned the child for a length of time (one year in most states), then his or her parental rights can be terminated.
  • How to show the other birth parent is unfit: If you have cause to show that the other birth parent is unfit, most state courts will conduct a fitness hearing. At this hearing, the court will deem the other birth parent unfit if she or he is abusive, neglectful, fails to visit, has a mental disturbance, is addicted to drugs or alcohol, or is incarcerated. Usually, when only one birth parent is deemed unfit, sole custody will be awarded to the other fit parent. In this case, stepparent adoption is easier, because the consent of the unfit parent is not required.
  • How to show the presumed birth father is not really the father: Showing that the other parent is not legally the father can also terminate that father’s parental rights. Each state has family laws stipulating who the presumed father is in certain situations, so be sure to check your own state’s laws. In ALL states, when a child is born to a married couple, the husband is the presumed father. If a man marries a woman after the birth of the child and the man is named as father on the birth certificate, that man is the presumed father. If you can show that the purported other parent is not the presumed father, you do not need to show unfitness or abandonment. You only need to show that he does not meet your state’s legal definition of “presumed father”. If you can do this, the court may terminate his rights. Thus, you wouldn’t need his consent for stepparent adoption. If the other parent DOES meet one of the requirements of your state’s “presumed father” definition, then either his consent will still be required, or you will need to prove abandonment or unfitness.

My partner and I are a same-sex couple. Can I adopt his child?

The U.S. Supreme Court’s 2015 Obergfell v. Hodges ruling overturned all state bans on same-sex marriage, making marriage equality the law of the land. In most cases, same-sex partners can adopt using the stepparent adoption procedures just like opposite-sex married couples can.

Free Consultation with Adoption Lawyer in Utah

If you have a question about a stepchild adoption or if you need a lawyer in Utah, please call Ascent Law at (801) 676-5506. We will help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Monday, 21 May 2018

Decided to File Bankruptcy

If you’re in the middle of a short sale or just about to do one, you probably have a lot of questions. What is the difference between a short sale and a foreclosure? And what happens if you might file bankruptcy, as well?

The benefit of continuing with a short sale after you’ve decided to file for bankruptcy will hinge on the type of bankruptcy you plan on filing.

Decided to File Bankruptcy

Short Sale and Chapter 7 Bankruptcy

If you have decided to file for Chapter 7 bankruptcy and are currently trying to sell a home via short sale, there is usually no reason to continue with the short sale. The purpose of a short sale is to relieve the borrower’s obligation to pay the difference between the sale price of the home and the mortgage amount when the property is “underwater” or worth less than what is owed.

Bankruptcy gives the borrower the option of surrendering the property back to the bank with no continuing obligation under the mortgage and no corresponding tax liability for the forgiveness of debt (usually a taxable event). In essence, surrendering a home in bankruptcy allows the borrower to simply give back the keys and walk away, leaving the purpose behind the short sale moot.

Bottom line: If you are going to file Chapter 7 bankruptcy, why deal with the stress of negotiating a short sale? However, if you still live in an area where homes are severely underwater and there is a backlog of foreclosures, it could make sense to go through with a short sale to get title out of your name. When a home is surrendered via bankruptcy, the bank still must foreclose to remove the owner’s obligation for HOA dues, etc.

Short Sale and Chapter 13 Bankruptcy

The analysis of a short sale bankruptcy is slightly different in a Chapter 13 setting. Chapter 13 bankruptcy allows the debtor to surrender a home, as well; however, any remaining deficiency judgment after foreclosure will be paid out as unsecured debt through the Chapter 13 plan.

Let us explain. Even though the property is being surrendered, the bank is still obligated to foreclose to clear title. The foreclosure process will result in a sale of the property. If the sale price is less than what is owed on the mortgage, a deficiency judgment results. Subject to state law, outside of bankruptcy, the borrower would be personally liable for the entire amount of the judgment. Generally, a Chapter 7 bankruptcy will eliminate all unsecured debt including deficiencies after a foreclosure.

By contrast, in a Chapter 13 bankruptcy, the deficiency between the foreclosure sale price and mortgage amount will be paid out as unsecured debt, at far less than 100%. Because the debtor will still be responsible to pay some of his or her unsecured debt through the plan, a short sale that slashes this debt before bankruptcy remains beneficial. Therefore, if a borrower can negotiate a short sale prior to filing for Chapter 13 bankruptcy, she will reduce her plan payment by reducing her unsecured debt.

Bottom line on Chapter 13 and short sales: Completing a short sale before this chapter of bankruptcy has the potential to lower your plan payments.

Before You File Bankruptcy Talk to a Bankruptcy Lawyer

It is always wise to consult with an experienced bankruptcy lawyer if you have questions, whether they be related to a short sale or foreclosure as it concerns your bankruptcy petition. Filing for bankruptcy can be complex, so you’ll want the assistance of a qualified attorney to guide you through the legal process and ensure you fill out all the paperwork correctly and disclose all your assets.

Free Consultation with a Bankruptcy Lawyer

If you have a bankruptcy question, or need to file a bankruptcy case, call Ascent Law now at (801) 676-5506. Attorneys in our office have filed over a thousand cases. We can help you. Come in or call in for your free initial consultation.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Sunday, 20 May 2018

How to Adopt

Once you have decided that you want to adopt a child, figuring out how to begin an adoption can be quite challenging. One of the first steps is to do decide which type of adoption is right for you. Prospective parents may choose to work with an adoption agency or proceed with an “independent” adoption without agency involvement. Also, birth parents and adoptive parents must decide how much contact they want with one another. Additionally, prospective parents must follow state regulations mandating the “home study” process, court approval, and other steps along the way. This sub-section includes articles and resources to help you get started and successfully complete the adoption process.

How to Adopt

Locating a Child to Adopt

Unless you are seeking to adopt a specific child the first question many would-be adoptive parents must face is how to locate a child in need of adoption. Common methods for identifying an adoptable child include the following;

Adoption agencies and government organizations may facilitate adoption and provide other helpful services that ensure that parents are matched with appropriate children in need of adoption. Acting as a foster parent may lead to a successful adoption, though not all foster relationships can result in an adoption.

Surrogacy, contracting to have someone bear a child on your behalf; can help ensure a genetic relationship between the adoptive parent and child, although surrogates are also used in circumstances where the child has no biological relationship with either of the adoptive parents.

Doctors, lawyers, and religious organizations may be aware of children in need of adoption as a result of their contact with the community. Your social network, the internet, and paid advertisement are other methods a parent seeking a child to adopt may publicize their availability and interest.

Home Study in Adoptions

All states require prospective parents to complete a “home study.” This process ensures that adoptive families are prepared and educated sufficiently for the adoption. Home study also provides information about the intending parents to establish that they are capable of providing a healthy environment for an adopted child. Specific requirements for home study vary greatly, but there are some common elements.

Many home studies require prospective parents attend training focused on the challenges raising an adopted child. Interviews are quite common and several of them may be required. Home visits ensure that state licensing standards are met. Health and income statements intend to ensure that a serious health or financial problem will not jeopardize the adopted child. Background checks, autobiographical statements, and references help establish that the person has no record of criminal activity or child abuse and help ensure that prospective parents will provide a home free of abuse or neglect.

Petitioning the Court for an Adoption

Although details may vary greatly, adoptions require a petition to the appropriate court. A petition, at minimum, will typically identify all parties, request the termination of parental rights of the birth parents, if any, and urge that the adoptive parents be granted custody of the child.

Proceedings and petitions may be quite complicated. Rules can vary greatly between jurisdictions and are nearly always fairly complicated. Retaining an agency, attorney, or both may be necessary to assist in representation.

Free Consultation with Adoption Lawyer in Utah

If you have a question about a stepchild adoption or if you need a lawyer in Utah, please call Ascent Law at (801) 676-5506. We will help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Saturday, 19 May 2018

Misleading Investors in Structured Notes

The Securities and Exchange Commission announced that Merrill Lynch has agreed to pay a $10 million penalty to settle charges that it was responsible for misleading statements in offering materials provided to retail investors for structured notes linked to a proprietary volatility index.

Misleading Investors in Structured Notes

According to the SEC’s order instituting a settled administrative proceeding, the offering materials emphasized that the notes were subject to a 2 percent sales commission and 0.75 percent annual fee.  Due to the impact of these costs over the five-year term of the notes, the volatility index would need to increase by 5.93 percent from its starting value in order for investors to earn back their original investment on the maturity date.  But the offering materials failed to adequately disclose a third cost included in the volatility index known as the “execution factor” that imposed a cost of 1.5 percent of the index value each quarter.

The notes were issued by Merrill Lynch’s parent company Bank of America Corporation, and Merrill Lynch had principal responsibility for drafting and reviewing the retail pricing supplements.  The SEC’s order finds that Merrill Lynch did not have in place effective policies or procedures to ensure its personnel drafted and approved disclosures that adequately disclosed the impact of the execution factor.

This is the agency’s second case involving misleading statements by a seller of structured notes. In October 2015, UBS AG agreed to pay $19.5 million to settle charges that it made false or misleading statements and omissions in offering materials provided to U.S. investors in structured notes linked to a proprietary foreign exchange trading strategy.

“This case continues our focus on disclosures relating to retail investments in structured notes and other complex financial products.  Offering materials for such products must be accurate and complete, and firms must implement systems and policies to ensure investors receive all material facts,” said Andrew J. Ceresney, Director of the SEC Enforcement Division.

Michael J. Osnato, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit, added, “This case demonstrates the SEC’s ongoing commitment to creating a level playing field when it comes to the sale of highly complex financial products to retail investors.”

The SEC’s order finds that Merrill Lynch violated Section 17(a)(2) of the Securities Act of 1933, which prohibits obtaining money or property by means of material misstatements and omissions in the offer or sale of securities.  Without admitting or denying the findings, Merrill Lynch agreed to cease and desist from committing or causing any similar future violations and pay a penalty of $10 million.

THE BURDEN FOR PLAINTIFFS IN CLAIMS OF BREACH OF FIDUCIARY DUTY

In Houseman v. Sagerman, the Delaware Chancery Court’s dismissal of the stockholder plaintiff’s claim for breach of fiduciary duty underscores the heightened pleading standard necessary to support such a claim by plaintiffs against a corporation’s directors arising out of allegations that the directors breached their duty in the process taken to approve the transaction.

The plaintiffs alleged that Universata’s board of directors conducted an imperfect process in regards to obtaining of the best price for stockholders. Two years after the merger between Universata, Inc. and Healthport Technologies, Inc. closed, the plaintiffs filed, among two other causes of action, the claim of breach of fiduciary duty. The plaintiffs allege that the director acted in bad faith by “knowingly and completely fail[ing] to undertake their responsibilities” to maximize shareholder value.

The Court, however, did not agree with the plaintiffs. The Court noted that the directors had, in fact, satisfied their duty of loyalty by taking into account, and acting upon, the advice of both their legal counsel and their financial advisor, Keyblanc. The allegations in the complaint showed that the Board had ultimately decided, after considering bids from several additional interested parties and negotiating the terms with Healthport, that it had obtained everything that the Board felt it could get.

Additionally, the plaintiffs failed to allege any facts that would prove a motive on the part of the directors to act in “bad faith.” The Court observed that the directors had a personal financial interest in obtaining the best price possible, dispelling the notion that the directors’ interests were not aligned with the interests of the company’s public stockholders.

According to the Court, the plaintiffs failed to plead sufficient facts to show that the board of directors of Universata “utterly failed to undertake any action to obtain the best price for stockholders.” The motion to dismiss, filed by certain directors and financial advisors of Universata, was therefore granted by the Court.

The Court, while recognizing that the approach the Board took was “less then optimal,” nevertheless granted the motion to dismiss, as the plaintiffs failed to meet the pleading standard. The decision in Houseman serves as a reminder to plaintiffs to be mindful of the high pleading burden that must be met to support a claim of breach of fiduciary duty.

 

EMPLOYERS: MAKE SURE YOUR STOCK OPTION PLAN ALLOWS YOUR GRANTEES THE ABILITY TO DEFER TAXABLE INCOME

The Code 83 regulations contain an important exception to the non-transferability rule that arises mostly with stock option grants, despite the fact that restricted stock grants are the type most often impacted by Code Section 83.

The exception to the regulations relates to profits realized under “short-swing” transactions. Under Section 16(b) of the Securities Act of 1934, any profit realized by an insider on a “short-swing” transaction must be disgorged by the company or a stockholder acting on the company’s behalf. “Short-swing” transactions are the non-exempt purchases and sales (or sales and purchases) of companies’ equity securities within a period of less than six months. In the event that a company grants a stock option that is not made under the applicable Section 16(b) exemption, it is deemed a non-exempt purchase.” Generally, the shares underlying the option are subject to the Section’s restrictions for six months after the date of the grant. Any sale of these shares within the six-month period following the grant date could be matched with the “purchase” and violate the Section.

With fairness in mind, it seems to follow that if a sale of shares would subject someone to potential SEC penalties, taxation on those shares would be delayed until the risk of liability lapses. Section 83 of the Code has always recognized this point. The Code Section 83 also recognizes that if a seller is restricted from selling shares of stock previously acquired in a non-exempt transaction within the past six months because of potential liability under Section 16(b), the shares are deemed to be subject to a substantial risk of forfeiture. This risk of forfeiture does not lapse, and as a result, the grantee will not realize taxable income until six months after which the acquisition of the shares by the grantee took place.

A question remained, however, regarding whether a subsequent non-exempt purchase could further extend the substantial risk of forfeiture. The final regulations answers this question, explaining with a new example that the Internal Revenue Service and the Treasury to not respect this type of strategy. The new example clearly notes that any options granted in a non-exempt manner will only be considered subject to substantial risk of forfeiture for the first six months after the date of the grant of the shares.

This new example means that the risk of disgorging any profits under Section 16(b) generally will not have any impact on the substantial risk of forfeiture analysis.

With this new example, the IRS is essentially eliminating any opportunity to abuse the Section 16(b). The IRS is reminding grantees that transfer restrictions alone cannot delay taxation. As a result, employers should be careful to ensure that their grants contain a valid substantial risk of forfeiture to allow the grantees the ability to defer taxable income.

Free Consultation with a Utah SEC Lawyer

If you are here, you probably have a business law or securities law matter you need help with, call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506