Commercial Law Programme Introduction to Business Law Craig Owen White Hahn Loeser & Parks LLP cowhite@hahnlaw.com © 2011 by Craig Owen White All Right Reserved

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BUSINESS LAW

Craig Owen White, Esq. Practicing For 27 years Williams College, BA, Economics University of Virginia, JD Senior Partner, Hahn Loeser & Parks, LLP – Cleveland, Ohio www.hahnlaw.com 150 lawyers 6 offices Co-Chair HLP Business Practice since 2008 ABA – Commission on Corporate Laws ISLP board of directors and volunteer since 2005

BUSINESS of LAW

Course Overview - Tuesday Morning Session 9:00 – 10:30 - Participant Self - Introductions Introduction to Business Law 10:30 – 11:00 Tea Break 11:00 - 12:30 Optimal Form of Business Enterprises 12:30 - 1:00 Questions and Answers

Course Overview - Tuesday Afternoon Session 2:00 – 3:00 - Introduction to Business Financial Statements and Capitalization 3:00 -- 4:00 Shareholders Rights and Agreements 4:00 -- 4:30 Questions and Answers

USEFUL RESOURCES www.islp.org/2011/BlaLogin.html Case Study Shareholders Agreement (Word format) Transaction Checklist (Word Format) Power Point Presentations

Useful Resources

US Business Failure Rate Only 29% Survive 10 years

Typical Business Transaction Buyer wants goods or services Delivered at a specified time and place At a specified price That meet specifications Seller willing to sell or provide goods or services Wants to receive payment Wants to keep the money received

Typical Investment Transaction Business Owner(s) or Operator(s) need capital to execute business transaction(s) to obtain a profit. Investor/Lender invests capital in exchange for a return on the investment that reflects the level of risk of loss.

Vukani Case Study Sandile Zondi Entrepreneur with 20 years of experience Food manufacturer Informal Business Leases a small building 2 kids (Mandla and Mbile) Mbile wants in for 30% share and as employee Mbile has growth plans Possible Options Commercial Loans Foreign Direct Investment Supplier Financing

Initial Consideration – Know Your Client International Senior Lawyers Project 11/9/2018 Initial Consideration – Know Your Client Who is Your Client Appetite for Risk Knowledge of Business Experience Level Expectations Engagement Scope 360 View of Transaction Upstream Downstream Vertical

Essential Objectives Memorialize with precision the meeting of the minds of the parties with respect to a transaction or series of transactions Basis for Enforcement under Rule of Law Private Ordering Preferred by Law Contract May be Viewed As an Asset Base for Securitization (i.e., standard mortgages) Base for Commercial Financing (i.e., factoring) Contracts memorialize and serve as evidence of the “meeting of the minds” of their participants on the rights and responsibilities of each party. For the rule of law to apply, the courts or other enforcer must be able to have a record that recreates that understanding with as much precision as possible. Capitalism requires predictability. So our rule of law societies enforce contractual agreements between the parties so that no only the parties to that contract but also others in the market can order their steps and plans with some degree of predictability. Governments impose laws. Industries and specialized markets will also impose rules of the road for their participants. And, finally, we allow parties to privately order the rules that govern their dealings with one another. Call it, the Law of the Contract.

A Lawyer’s Perspective International Senior Lawyers Project 11/9/2018 A Lawyer’s Perspective Risk Identify Quantify Rationalize Allocate Shift Hedge Responsibilities Ethics Transparency Documentation of Terms Results Documentation Necessary to Support Claim Cost of Achieving Result Time Frame for Achieving Result The business lawyer must construct a framework within which must problems are analyzed. The two bookends on the framework are Risk and Results.

Business Lawyer’s Function Ensure that Client understands the terms Assist client in uncovering risks and their consequences Try to get the contract to express the rights and responsibilities of each party Archivist of documentation necessary to enforce rights 1. Lawyer must satisfy himself that the client understands the terms on the agreement including the “boilerplate”. Sometimes its better not to have a written agreement is client is not going to adhere to it. Never let the client sign an agreement that contains provisions that are untrue or that client cannot meet. 2. Due Diligence requires basic investigation and targeted investigations Basic investigation today includes checking the public records and Internet searches. Targeted investigations include requesting documents be produced by the prospective business partners (examples might include contracts, financial statements, incumbency certificates) Contract Based investigations. Specific and well-thought out representations, warranties and indemnifications. 3. Archivist Know what documents are required by a Court or arbitrator to support or defend a claim.

Business Lawyer’s Toolkit Filing System Standard Key Documents Engagement letter Disengagement Letter Invoices Legal Opinions Separate Funds Account Checklists Due Diligence Applicable Law Trade Resources Professionals Tax Lawyers Accountants Environmental Privacy Divorce Criminal

Know the Environment Industry Standards International Transaction Governing Law Tax Considerations Reputational Considerations

Means and Tools Due Diligence Representations and Warranties Indemnification Covenants Affirmative Covenants Negative Covenants Collateral/Surety Goods Funds Insurance/Surety

Role of Contracts Weaknesses Imperfection of Words Contract Length Need for Grey Areas Amendment by Conduct of the Parties Changed Circumstances Unforeseen Events Interrelationship with Other Agreements It is impossible to cover every possibility and to select the perfect word. In the art of negotiation, words are both a weapon and a currency. To obtain agreement, compromise may be gained by using a word that is less than precise or perfect for the situation. In fact, each side may have a different view of what the word means. Contracts can also last for a many years and, as a result, words, terms and practices that were commonplace in one era may have diluted or lost meanings in another era. For instance, requiring important notices to be sent via telex may have little to no meaning in an Internet-based world. If parties can not agree on how a specific situation is to be handled, they may not want to delay the deal while an agreement is worked out or acknowledge that losing the entire deal is not worth the failure to agree over this particular business point. The parties may “agree to disagree” or “kick the can down the road” with language that leaves the point open. The classic situation is with the selection of an arbitrator. If the parties can not mutually agree on an arbitrator, then an arbitrator is selected by a third party forum. Clients are, first and foremost, business people and rarely will defer to lawyers while in the midst of get a business deal done. Client’s conduct can undermine the integrity of a written contract as the expression of the understanding an agreement between the parties as to their respective rights and obligations. The argument is why should some provisions in the agreement remain enforceable if the parties have altered others by their mutual conduct?

Smartest Guy in the Room

H a h n L o e s e r + P a r k s L L P Attorneys at Law Thank You ! Craig Owen white 200 Public Square Suite 2800 Cleveland, OH 44114-2301 direct dial cell phone main fax e-mail 216.274.2231 216.338.1065 216.274.2531 cowhite@hahnlaw.com H a h n  L o e s e r  +  P a r k s  L L P Attorneys at Law