Too often, entrepreneurs (who intend on starting the next IPO) pay little to no attention to their organizational documents. This is quite intriguing, as it is similar to buying a house, and not paying attention to whose name is on the title, or what is in the covenants, conditions, and restrictions or neighborhood association bylaws; or getting married and not discussing prior to such marriage who will pay the mortgage.Continue Reading Business Partner or Spouse? Why Organizational Documents Are So Important
In Skeels v. Suder, a departing shareholder of a law firm sued regarding the firm’s decision to redeem his shares for no consideration. No. 21-1014, 2023 Tex. LEXIS 578 (Tex. June 23, 2023). Partners of a law firm entered into a shareholder agreement that allowed certain individuals to take action. The resolution stated:
Notwithstanding the number of shareholders, or the number of shares issued to any shareholder, Walker Friedman, Jonathan Suder and Michael Cooke, collectively, have been entitled, and shall continue to be entitled, to take affirmative action on behalf of the Firm, and veto any vote or action taken by or on behalf of the Firm, and/or by any other shareholder, whether individually, or collectively.
Id. (emphasis added). The firm’s governing documents did not address redemption, and after the firm terminated a shareholder’s employment, he did not agree to the founders’ proposed redemption terms. The founders then purported to redeem his shares at no cost, arguing that a resolution generally authorizing the founders “to take affirmative action on behalf of the Firm” unambiguously encompasses redemption. The trial court ruled for the lawfirm and rejected the departing shareholder’s claim regarding the redemption.
The majority of the court of appeals affirmed that under the various documents, it had the right to do so: “The plain language of the Resolution—a shareholder agreement—broadly allowed Friedman, Suder, and Cooke as the Firm’s governing authority to take affirmative action on behalf of the Firm; thus, the trial court did not err by finding that the Resolution governed the redemption of Skeels’s shares on the terms dictated by the Firm’s governing authority.”
The Texas Supreme Court reversed. The court noted that the Texas Organizations Code provides that corporate shares are personal property, but a professional corporation may redeem them if the redemption price and other terms are (1) “agreed to between the board of directors” and either “the shareholder” or his “personal representative,” (2) “specified in the governing documents” or “an applicable agreement,” or (3) determined according to a statutorily authorized “shareholders’ agreement.” Id.
The Texas Supreme Court held that:
modifying “affirmative action” with “on behalf of the Firm,” the resolution authorized the founders to take action the firm could take, but it did not constitute the departing shareholder’s agreement that the founders may set redemption terms of their own accord on his behalf. Nor does the resolution itself “specif[y]” any redemption terms. And because the firm was not authorized—by statute, governing document, or shareholders’ agreement—to set the redemption terms without the departing shareholder’s agreement, the resolution did not independently authorize the founders to unilaterally determine those terms.
In Eho360 LLC v. Opalich, an employer sued its former employee for breaching fiduciary duties and other related claims regarding the former employee setting up a competing business. No. 3:21-CV-0724-B, 2023 U.S. Dist. LEXIS 45076 (N.D. Tex. March 17, 2023). The employee filed a motion for summary judgment, which the district court denied. The court stated the law in Texas as follows:
Under Texas law, “[t]he elements of a breach of fiduciary duty claim are: (1) a fiduciary relationship between the plaintiff and defendant; (2) the defendant must have breached his fiduciary duty to the plaintiff; and (3) the defendant’s breach must result in injury to the plaintiff or benefit to the defendant.” A fiduciary duty generally entails “fair dealing and good faith” and “integrity and fidelity.” When a fiduciary relationship exists between an employer and an employee, an employee “has a duty to act primarily for the benefit of the employer in matters connected with his [employment].” But, “an employer’s right to demand and receive loyalty must be tempered by society’s legitimate interest in encouraging competition.” Under Texas law, “[a]n at-will employee may properly plan to go into competition with his employer and may take active steps to do so while still employed.” And a fiduciary relationship “does not preclude the fiduciary from making preparations for a future competing business venture; nor do such preparations necessarily constitute a breach of fiduciary duties.” However, the Texas Supreme Court has imposed limitations on an employee’s right to prepare to compete with his employer. “[An employee] may not appropriate his employer’s trade secrets . . . . He may not solicit his employer’s customers while still working for his employer . . ., and he may not carry away certain information, such as lists of customers. . . . Of course, such a person may not act for his future interests at the expense of his employer by using the employer’s funds or employees for personal gain or by a course of conduct designed to hurt the employer.” And while “[f]iduciary duties generally terminate at the end of an employment relationship,” some duties survive the termination of employment. One such duty “forbids an employee from using confidential or proprietary information acquired during the relationship in a manner adverse to his employer.” “Although this duty does not bar use of general knowledge, skill, and experience, it prevents the former employee’s use of confidential information or trade secrets acquired during the course of employment.”
Id. (internal citations omitted).
The court held that the evidence created a fact issue as to whether the defendants, who were executives, used confidential information from their former employer to set up their new competing business. This was true even though the defendants had no restrictions on competition. Further, regarding damages, the court held that even though the plaintiff did not lose any business, the evidence showed that the defendants benefited from their fiduciary breaches, which is sufficient to sustain a breach of fiduciary duty. Based on this evidence the court denied the summary judgment motion as to both defendants.
Often in business divorce cases, one party will assert that the other party breached fiduciary duties. The defending party may then raise a statute of limitations defense, arguing that the claim is stale and should have been raised earlier. The statute of limitations in Texas for breach of fiduciary duty is four years. The party raising the claim may then argue that the statute was tolled due to the discovery rule and that the party did not know of the claim in time to raise it within the limitations period. The Texas Supreme Court recently issued an opinion addressing the use of the discovery rule for tolling limitations in breach of fiduciary duty cases.
In Marcus & Millichap Real Est. Inv. Servs. of Nev. v. Triex Tex. Holdings, LLC, Triex purchased a gas station in 2008 from Hamilton Holdings. No. 21-0913, 2023 Tex. LEXIS 22 (Tex. January 13, 2023) (per curiam). Both the buyer and seller used Marcus & Millichap as their broker for the transaction. In 2012, the operator of the gas station defaulted on the lease. A little over three years later, Triex sued Hamilton Holdings and others for breach of contract, fraud, and related torts. After some discovery, Triex added Marcus & Millichap to the lawsuit in March 2017 and asserted claims for breach of fiduciary duty, fraud by nondisclosure, and conspiracy. Marcus & Millichap moved for summary judgment, arguing that Triex’s claims were time-barred. The trial court granted the motion, and the court of appeals reversed and remanded, concluding that a fact issue existed as to whether Triex “knew or should have known on [December 1, 2012,] that the injury was the result of wrongful acts committed by Marcus & Millichap.” The Texas Supreme Court granted review.
The Court noted that a claim generally accrues when the defendant’s wrongful conduct causes the claimant to suffer a legal injury. Id. The Court also noted that the discovery rule can defer accrual of limitations:
The discovery rule is a “narrow exception” to the legal injury rule that “defers accrual of a cause of action until the plaintiff knew or, exercising reasonable diligence, should have known of the facts giving rise to the cause of action.” It “applies when the injury is by its nature inherently undiscoverable.” “An injury is inherently undiscoverable if it is by nature unlikely to be discovered within the prescribed limitations period despite due diligence.” “The determination of whether an injury is inherently undiscoverable is made on a categorical basis rather than on the facts of the individual case.” The question is whether the injury is “the type of injury that could be discovered through the exercise of reasonable diligence.”
Id. The Court then discussed the application of the discovery rule in fiduciary cases:
We have held that “in the fiduciary context, . . . the nature of the injury is presumed to be inherently undiscoverable” because “[f]iduciaries are presumed to possess superior knowledge.” So “[a] person to whom a fiduciary duty is owed may be unable to inquire into the fiduciary’s actions or may be unaware of the need to do so.” Accordingly, “even if inquiry is made, ‘[f]acts which might ordinarily require investigation likely may not excite suspicion where a fiduciary relationship is involved.'”
Id. The Court then held that the discovery rule applies in this case as a fiduciary relationship existed. “When the discovery rule applies, the statute of limitations does not begin to run ‘until the plaintiff knew or in the exercise of reasonable diligence should have known of the wrongful act and resulting injury.’” Id. The Court discussed recent precedent on application of the discovery rule in fiduciary cases:
We have stated this rule in slightly different ways. But last Term, we explained that this means the discovery rule defers accrual “until the claimant knew or should have known of facts that in the exercise of reasonable diligence would have led to the discovery of the wrongful act.” Or, in other words, accrual is deferred “until the plaintiff knew, or exercising reasonable diligence, should have known of the facts giving rise to the cause of action.” Consistent throughout our cases is the requirement of reasonable diligence. We have also explained that “the discovery rule does not linger until a claimant learns of actual causes and possible cures.” Nor does it defer accrual until the plaintiff knows “the specific nature of each wrongful act that may have caused the injury,” or “the exact identity of the wrongdoer.”
Id. The Court then held that Triex should have discovered its claims, using reasonable diligence, before four years before the claims were filed:
In 2012, Triex had actual knowledge of its injuries and became aware of the need to inquire into Marcus & Millichap’s actions. The court of appeals concluded that “the evidence conclusively establishe[d] that appellants were aware that they had sustained an injury by December 1, 2012,” the date Taylor Petroleum defaulted. But it determined that a fact issue existed as to whether Triex “knew or should have known on [December 1, 2012,] that the injury was the result of wrongful acts committed by Marcus & Millichap.” The court of appeals came to this conclusion by “reliev[ing] [Triex] of the responsibility of diligent inquiry” because of its fiduciary relationship with Marcus & Millichap. But as we reiterated last Term, “those owed a fiduciary duty are not altogether absolved of the usual obligation to use reasonable diligence to discover an injury.” Recognizing that “the presence of a fiduciary relationship can affect application of the discovery rule,” we explained that “it remains the case that ‘a person owed a fiduciary duty has some responsibility to ascertain when an injury occurs.’ ‘[W]hen the fact of misconduct becomes apparent it can no longer be ignored, regardless of the nature of the relationship.'”
Had Triex exercised reasonable diligence, it would have discovered Marcus & Millichap’s allegedly wrongful acts. Part of Triex’s claim against Marcus & Millichap is that it misrepresented that “this was a sure-fire and financially sound investment,” and that “rent would be coming in every month without any issues or risk.” When Taylor Petroleum defaulted on the lease, Triex “knew or should have known that something was amiss.” Indeed, Weiner’s affidavit in response to the summary judgment motion admitted that at the time of the breach, he knew Marcus & Millichap did a “poor job” of representing him. His awareness of his injury and of Marcus & Millichap’s poor representation “obligated him to make further inquiry on his own if he wanted to preserve a timely claim.” Instead, Triex waited three years to sue the initial defendants, and an additional year to take depositions.
Id. For the same reasons, the Court rejected a fraudulent concealment defense. The Court reversed the judgment of the court of appeals and reinstated the trial court’s judgment dismissing all of Triex’s claims against Marcus & Millichap.
In Dunn v. Chappelle (In re Alta Mesa Res., Inc.), a bankruptcy trustee sued the officers and directors of a limited partnership and related entities for operating a drilling program despite having lower than expected results. No. 19-35133, 2022 Bankr. LEXIS 2928 (U.S. Bankr. Ct. October 13, 2022). The defendants filed a motion to dismiss. The court granted it in part and denied it in part. The court first analyzed the partnership agreement and held that officers of the partnership’s parent corporation did not owe fiduciary duties to the partnership:
The Agreement forms a limited partnership under the laws of Texas and specifically provides that Texas law will govern. Under Texas law, “except as provided by . . . a partnership agreement, a general partner of a limited partnership . . . has the liabilities of a partner in a partnership without limited partners.” Tex. Bus. Orgs. Code Ann. § 153.152 (2021). In other words, subject to the terms of a limited partnership agreement, the general partner of a limited partnership has the same duties of a partner in a general partnership. Those duties include the duty of loyalty and the duty of care. Tex. Bus. Orgs. Code Ann. § 152.204 (2021)… Only the general partner owes fiduciary duties to Alta Mesa. Nowhere does the Agreement state that directors or officers of AMR owe fiduciary duties to Alta Mesa. Similarly, the Texas Business Organizations Code does not impose such a duty on the directors of a parent corporation.
Id. The court then analyzed whether the officers of the general partner owed fiduciary duties to the limited partnership:
The Texas Business Organizations Code states that “a partnership may have elected or appointed officers.” Tex. Bus. Orgs. Code Ann. § 151.004 (2021). An officer “shall perform the duties in the management of the entity and has the authority as provided by the governing documents of the entity.” Tex. Bus. Orgs. Code Ann. § 3.103 (2021)…
Dunn argues that the defendants’ control over Alta Mesa means that they had fiduciary duties to Alta Mesa. While Texas law supports this theory, the issue is whether Dunn has sufficiently plead factual allegations to plausibly support it. The Fifth Circuit found in Harwood that “[A]n officer of a corporate general partner who is entrusted with the management of the limited partnership and who exercises control over the limited partnership . . . owes a fiduciary duty to the partnership . . . . We emphasize that it is not only the control that the officer actually exerts over the partnership, but also the confidence and trust placed in the hands of the controlling officer. . . .” FNFS, LTD. v. Harwood (In re Harwood), 637 F.3d 615, 622 (5th Cir. 2011).
Dunn pleads numerous factual allegations that demonstrate the high degree of control that Chappelle, Ellis, and Turner exercised over the operations of Alta Mesa. Dunn alleges that they were involved in the decision-making process at every stage of the drilling program from the testing that began before the merger to the decision to install ESPs when production fell below projected levels. They were charged with presenting information on the program to the board of AMR and to investors. There is no indication that the board did anything to interfere with the officers’ control until almost a year after they approved the drilling program. Unlike the defendant in Harwood, the defendants did far more than “hold themselves out” as officers of Alta Mesa. They actually were officers of Alta Mesa, and exercised power in that capacity. The totality of the circumstances, if proven, would support a finding of a fiduciary relationship. To clarify, the Court does not base its analysis on the directors’ positions or purported positions as officers of Alta Mesa GP. That fact is merely another marker of the control the defendants exercised over Alta Mesa in their capacity as officers of Alta Mesa directly. Dunn’s complaint sufficiently alleges facts to support the claim that Chappelle, Ellis, and Turner owed fiduciary duties, looking to the totality of the nature of their relationship to Alta Mesa.
The court then held that the trustee pleaded sufficient allegations of breach of the duty of loyalty by alleging that the officers provided insufficient information about the drilling program:
The Texas Business Organizations Code codifies the internal affairs doctrine and provides that Texas law “governs the formation and internal affairs of an entity” formed under a certificate filed under the laws of Texas. Tex. Bus. Orgs. Code Ann. § 1.101 (2021). Texas limited partnerships, as entities formed by filing certificates, are subject to the internal affairs doctrine. Tex. Bus. Orgs. Code Ann. § 152.802 (2021). Therefore, Texas law governs the dispute as to whether the officers of a Texas limited partnership breached fiduciary duties to the partnership. Herington v. Univar Solutions Inc., 2021 U.S. Dist. LEXIS 165986, 2021 WL 3828702, at *2 (S.D. Tex. May 20, 2021) (“The internal affairs doctrine applies to breach of fiduciary duty claims.”). The two primary fiduciary duties in Texas are the duty of care and the duty of loyalty. Gearhart Indus., Inc. v. Smith Int’l, Inc., 741 F.2d 707, 719 (5th Cir. 1984). In Texas, the business judgment rule is treated as a “rule of substantive law that requires a plaintiff . . . to plead and prove (1) that the conduct . . . was outside the exercise of judgment and discretion the rule is meant to protect, or (2) that the directors had a personal interest in the transactions complained of.” Resol. Tr. Corp. v. Norris, 830 F. Supp. 351, 356 (S.D. Tex. 1993). Therefore, Dunn must plead around the business judgment rule in alleging the officers breached either their duty of care or their duty of loyalty to survive dismissal….
To abide by the duty of care, directors generally must “inform themselves, before making a business decision, of all material information reasonably available to them.”… A poor decision that leads to a bad outcome is not a breach; failing to properly gather and analyze information while making that decision is a breach.
The Complaint indicates that Chappelle, Ellis, and Turner went to great effort to inform themselves and had intricate knowledge of how the wells were performing. They did not breach their duty of care simply because their decisions turned out poorly. Alternatively, Dunn alleges that having gathered and analyzed all the information necessary to make an informed business decision, Chappelle, Ellis, and Turner failed to disclose that information to the AMR directors and investors and even actively withheld and hid that information from the AMR directors. (ECF No. 50 at 39-43). Like Northstar, Dunn raises the issue of the duty of loyalty rather than the duty of care.
“The duty of loyalty dictates that a director must act in good faith and must not allow his personal interests to prevail over the interests of the corporation.” Gearhart, 741 F.2d at 719. The business judgment rule does not apply to self-dealing transactions. Northstar, 616 B.R. at 739. Because the duty of loyalty is most commonly called into question in instances involving self-dealing, the business judgment rule does not typically apply to the duty of loyalty. Here, there are no allegations that the officers were self-interested, and there is little case law addressing what constitutes “good faith” in this context. The duty of loyalty in Texas includes duties of candor and disclosure. Chapman v. Arfeen, No. 09-16-00272-CV, 2018 Tex. App. LEXIS 7132, 2018 WL 4139001, at *15 (Tex. App.—Beaumont Aug. 30, 2018, pet. denied); see also McBeth, 565 F.3d at 178 (reasoning that, as fiduciaries, partners in a limited partnership owe one another a duty of disclosure). Deciding whether to share specific information is itself a business decision. Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 181 (1997). Because disclosure is a business decision, to the extent the allegations of breach of the duty to disclose do not allege self-dealing, the business judgement rule applies. A complaint successfully pleads around the business judgment rule where the facts support an inference that the officers acted dishonestly or deceptively in the withholding of information. Chapman, 2018 Tex. App. LEXIS 7132, 2018 WL 4139001, at *15 (citing Sneed v. Webre, 465 S.W.3d 169, 178 (Tex. 2015)).
Dunn alleges not only that Chappelle, Ellis, and Turner withheld information from the board, but further suggests they intentionally manipulated data presented to the AMR board and to investors to obscure the fact that the drilling program’s performance fell below projections. Specifically, the complaint alleges that Chappelle and Turner decided to present “cleaned up” data. They cut off a graph comparing well production to type curves right before the point where the graph showed actual production falling below the type curves. They also recalculated average production from the wells by removing the poorest performing wells from that calculation. Additionally, the complaint alleges that Ellis knew the patterns were underperforming and did not inform the board, and he participated in presentations of manipulated data to the investors and the board knowing the data had been similarly “cleaned up.” These factual allegations involve dishonesty and deception and call into question whether the officers acted in good faith or, as the trustee alleges, in an effort to save their jobs. Motive will be a matter for trial. But, the complaint sufficiently overcomes the business judgment rule’s presumption to plausibly plead a breach of the duty of loyalty with respect to defendants Chappelle, Ellis, and Turner.
David Johnson co-authored a paper entitled “Voir Dire (In a Post COVID World)” with Jason Smith of the Law Offices of Jason Smith for the State Bar of Texas’s Business Disputes Course, held in Austin, Texas, on September 15-16, 2022. The paper covered the waterfront of voir dire topics in Texas litigation, including preservation of error, selecting the array, size of the jury, jury shuffle, questions to the venire, comments by venire members, challenges for cause, preemptory challenges, and Batson issues. Most trial attorneys will say that selecting a jury is the most important part of a trial. This paper provides important guidance to trial attorneys on what is allowed or not allowed in the selection process and what is necessary to preserve error.
In Trench Tech Int’l, Inc. v. Tech Con Trenching, Inc., the son of an owner of a company, who was an employee, downloaded design plans and other information and went to another company who used that information. No. 4:19-cv-00201-O, 2022 U.S. Dist. LEXIS 100280 (N.D. Tex. June 6, 2022). The company and the company that owned it sued the son for trade secret misappropriation and breach of fiduciary duty. The defendant moved for summary judgment, and the federal district court denied the motion. Regarding the breach of fiduciary duty claim, the defendant argued that he was only an employee of the first company and not its owner and therefore did not owe fiduciary duties to the owner. The court disagreed:
Trench Tech asserts a claim against Smith for breach of fiduciary duties, and it asserts claims against Tech Con, Conlon, and Smith for conspiracy to have Smith and Jeremy breach their fiduciary duties. Defendants argue that they are entitled to summary judgment on Trench Tech’s breach-of-fiduciary-duty claims because (1) Trench Tech cannot establish a fiduciary relationship with Smith or Jeremy, and (2) the claims are barred by the statute of limitations. First, Defendants argue that Trench Tech cannot establish a fiduciary relationship. Under Texas law, “[a]n informal relationship may give rise to a fiduciary duty where one person trusts in and relies on another, whether the relation is a moral, social, domestic, or purely personal one.” But “to impose such a relationship in a business transaction, the relationship must exist prior to, and apart from, the agreement made the basis of the suit.” Trench Tech has presented sufficient evidence for a jury to find that Smith and Jeremy owed fiduciary duties to Trench Tech. They were longtime employees of the family business and entrusted with confidential material. “Texas courts have long recognized that entrustment of trade secrets gives rise to a fiduciary relationship.” Defendants recycle their argument that Smith and Jeremy worked for Trench-Tech, Ltd., not Trench Tech International, and thus they owed no fiduciary duties to Trench Tech International. Once again, Defendants cite no authority restricting fiduciary duties to employer-employee relationships. The formalities of Trench Tech’s entity formation do not preclude a jury finding that Smith and Jeremy owed and breached fiduciary duties to Trench Tech.
Id. The court also held that the statute of limitations did not bar the plaintiff’s breach of fiduciary duty claim.
In In re Mijares, a plaintiff claimed that a defendant defrauded him and breached fiduciary duties owed to him by charging improper, excessive, and unauthorized expenses to their medical practice, causing the plaintiff’s distributions from the practice to be reduced during the roughly six years that they practiced medicine together. Case No. 19-33121-hdh7, Adv. Proc. No. 19-03243,2022 Bankr. LEXIS 1542 (N.D. Tex. Bankr. June 1, 2022). The plaintiff sought a declaration that his claims for fraud and breach of fiduciary duty were not dischargeable pursuant to sections 523(a)(2)(A) and (a)(4) of the Bankruptcy Code. The court found that the plaintiff held a valid claim against the defendant for fraud and that such claim was not dischargeable.
Regarding the plaintiff’s breach of fiduciary duty claim, the court held:
Under Texas law, to prevail on a breach of fiduciary duty claim, a plaintiff must show (1) a fiduciary relationship between the plaintiff and the defendant, (2) that the defendant breached his fiduciary duty to the plaintiff, and (3) that the defendant’s breach resulted in injury to the plaintiff or benefit to the defendant.
It is not clear whether there was a fiduciary relationship directly between the Plaintiff and the Defendant. Courts generally hold that a managing member of a limited liability company does not necessarily owe fiduciary duties to other members. Although “the Texas statute governing limited liability companies implies that certain duties may be owed, it does not define any such duties, but rather allows the contracting parties to specify the breadth of those duties in the company agreement.”
Per the Company Agreement, both the Plaintiff and the Defendant served as Manager-Members. Article VIII of the Company Agreement provides various rights, duties, and powers of the Managers. Per this section, the Managers “shall have the full, sole, exclusive and complete discretion in the management and control of the business, operations and affairs of the Company; shall make all decisions that are necessary to carry out the business of the Company . . . .” The same section goes on to require that “[a]ll decisions and actions by the Managers shall be made in the best interests of the Company.” Thus, the Company Agreement makes it clear that the Defendant owed a fiduciary duty to MD Request but does not resolve the issue of whether the members owed fiduciary duties to each other because it neither disclaims nor expressly imposes such duties.
Nevertheless, Texas law recognizes that an informal fiduciary relationship, “may arise where one person trusts in and relies upon another, whether the relationship is a moral, social, domestic, or purely personal one.” The existence of a fiduciary duty is a fact-specific inquiry that takes into account the contract governing the relationship as well as the particularities of the relationships between the parties. Some courts have taken into account the “unequal” positions of power of members in a limited liability company, such as when one member exercises superior control over the company.
Both parties testified during trial that the Defendant almost exclusively handled the finances for MD Request. The Defendant did the calculations and remitted payments to the Plaintiff. Through an established course of dealing for the better part of six years, the Plaintiff placed a special confidence in the Defendant to compensate the Plaintiff accurately and honestly for his revenue, which was to be measured as his monthly collections less his half of the shared expenses.
Based on these facts, the Court believes there is a reasonable argument that the Defendant owed fiduciary duties directly to the Plaintiff, but the Court need not make that determination since the Court has already determined the Plaintiff has a claim for fraud, and the damages for breach of fiduciary duty would be the same as those previously identified for fraud.
Settlors often place some or all of the ownership in a closely-held business in a trust. A trustee managing a trust with an interest in a closely held business has difficult management issues to address and this often raises disputes. This presentation will address: (1) considerations in placing closely-held business interests in trusts, (2) considerations that a trustee should undertake in managing a closely-held business interest, (3) managing an ownership interest versus being a controlling person in the entity and the risks associated with holding both roles, (4) best practices for addressing conflicts of interest and for avoiding breaches of fiduciary duties, (5) attorney-client communication and privilege issues, (6) disclosure obligations to beneficiaries, (6) directed trust issues, and (7) co-trustee issues.
Date: Tuesday, September 27, 2022
Time: 10:00 – 11:00 a.m. Central Time
Speaker: David F. Johnson
Continuing Education Credit Information:
This course has been approved by the State Bar of Texas Committee on MCLE in the amount of 1 credit hour. This course has also been approved for 1.25 CTFA credit by the American Bankers Association, attendees can self report.
Who should attend:
In-house counsel and other litigation contacts, trust officers, risk management contacts, and wealth advisors
David F. Johnson presented “Advising Trustees Who Manage Closely-Held Business Interest” to the WealthCounsel webinar on June 30, 2022. Continue Reading Presentation: Advising Trustees Who Manage Closely-Held Business Interests