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July and August are filled with many significant events in legal history. In 1776, the Declaration of Independence was adopted by the Continental Congress; in 1868 the 14^th Amendment to the Constitution, focusing on State actions, was ratified; August 1776, is when most members of the Continental Congress signed the Declaration of Independence; President Johnson signed the Voting Rights Act on August 6, 1965; Thurgood Marshall was confirmed as a Justice of the Supreme Court on August 30, 1967, and, on August 8, 1974, President Nixon announced his resignation on national television.  All these events are significant and worthy of their own discussion, but I want to focus this month on the Declaration of Independence. 

But let’s start on July 2. 1776.  John Adams stated, in a July 3, 1776, letter to his wife Abigal, that “[t]he Second Day of July 1776, will be the most memorable Epocha, in the History of America.  I am apt to believe that it will be celebrated, by succeeding Generations, as the great anniversary Festival.  It ought to be commemorated, as the Day of Deliverance by solemn Acts of Devotion to God Almighty.  It ought to be solemnized with pomp and Parade, with Shews, Games, Sports, Guns, Bells, Bonfires, and Illuminations from one End of this Continent to the other from this Time forward forever more.”[i]   What event triggered such strong feelings?  It was the adoption, on July 2, 1776, of the Lee Resolution by the Continental Congress.

The Lee Resolution was proposed on June 7, 1776, by Ridhard Henry Lee of Virginia.  The Lee Resolution stated: “Resolved, That these United Colonies are, and of right ought to be, free and independent States, that they are absolved from all allegiance to the British Crown, and that all political connection between them and the State of Great Britain is, and ought to be, totally dissolved.  That it is expedient forthwith to take the most effectual measures for forming foreign Alliances.  That a plan of confederation be prepared and transmitted to the respective Colonies for their consideration and approbation.” [ii] A few days after proposal of the Lee Resolution, a committee was appointed to draft a declaration of independence.

The Lee Resolution was approved on July 2, 1776, by a vote of 12-0 with the New York delegation abstaining.  Then, on July 4, 1776, the Continental Congress approved the Declaration of Independence.

The Declaration of Independence, in my view, is not “A declaration of unity and love and respect . . .”  I read it as just the opposite.  The opening paragraph specifically states that the document was a declaration of “the causes which impel them [the People] to the Separation.”  The second paragraph (“We hold these truths to be self evident . . .”) explains that the decision to declare independence was not a knee jerk reaction to some isolated event, but rather the declaration resulted from “a History of repeated Injuries and Usurpations, all having in direct Object the Establishment of an absolute Tyranny over these States.”    One of my favorite lines appears in this paragraph-“But when a long Train of Abuses and Usurpations, pursuing invariably the same Object, evinces a Design to reduce then under absolute Despotism, it is their (the People) Right, it is their Duty, to throw off such Government, and to provide new Guards for their future Security.”  The Declaration continues with a long list of specific “Abuses” and “Usurpations”  justifying the Declaration.  Then, the Declaration explains that every “Petition for Redress” was rebuffed and “answered only by repeated Injury” and only as a last resort, when every other avenue failed, was “Separation” necessary.

After adopting the Declaration of Independence, the Continental Congress then directed that the Declaration be engrossed on parchment and on August 2, 1776, John Hancock signed, followed by other delegates.  Interestingly, Robert R. Livingston of New York, and a member of the 5-person committee charged with drafting the Declaration, did not sign[iii] and Richard Stockton of New Jersey “recanted” his signature when, having been captured by the British and held under harsh conditions, he took an oath of obedience to the King.[iv]

The Declaration of Independence contains a mere 1,337 words (including the title) and can be read in about six minutes.  I encourage everyone to take the six minutes to read the Declaration; it is as relevant today as it was 249 years ago and it has helped my understanding of our country and the Constitution.

For anyone interested in gaining a better understanding of the Declaration of Independence and its relationship to the Constitution, I highly recommend “We Hold These Truths” by Mortimer J. Adler.

[i] https://www.masshist.org/digitaladams/archive/doc?id=L17760703jasecond

[ii] https://www.archives.gov/milestone-documents/lee-resolution

[iii] https://www.constitutionfacts.com/us-declaration-of-independence/fascinating-facts/?srsltid=AfmBOor9ZsEV-Zvew4we_1Ven4lpiPnUbzbIkpOKlUZ1P0YXjx2ytwrH

[iv] https://www.americanheritage.com/signer-who-recanted

One of the earliest and most critical legal obstacles in any mergers and acquisitions (M&A) transaction is securing the necessary consents and approvals. These consents can come from a range of parties including lenders, landlords, counterparties to key contracts, shareholders, franchisors, and regulatory agencies. Failing to obtain even one required approval can delay or derail a deal entirely, expose the parties to contractual liability, or lead to regulatory sanctions.

Bank loan consents are among the most commonly overlooked but vital approvals. Many corporate loan agreements include “change of control” clauses that trigger an event of default if the borrower undergoes a significant ownership shift. Without express consent from the lender, this could result in the acceleration of outstanding debt or other penalties. Early and transparent communication with lenders is therefore essential to avoid surprises late in the process.

CMM Partner Vincent Costa and Associate Alex Tomaro recently closed an M&A transaction involving the sale and transfer of multiple family-owned businesses and real estate assets across Long Island. The deal required the team to navigate particularly complex bank consents in order to close. Discussions with multiple lenders spanned several months and significantly delayed the closing, highlighting the importance of initiating lender conversations as early as possible in the deal timeline.

Landlord approvals are similarly important in asset deals or transactions involving corporate reorganizations. Commercial leases frequently contain provisions prohibiting assignment or subletting without the landlord’s prior written consent. Ignoring these clauses may result in lease termination or default, potentially disrupting business operations or diminishing the value of the deal.

Customer and supplier contracts often present a hidden risk. Key commercial relationships may be governed by contracts containing anti-assignment or change-of-control provisions. These clauses can allow counterparties to terminate or renegotiate agreements upon notice of the transaction, placing revenue streams and supply chains in jeopardy. Identifying these contracts early in diligence is essential to maintain operational continuity.

Shareholder and board approvals also play a central role, particularly in public or closely held companies. Internal corporate governance documents, such as bylaws and shareholder agreements, may require board approval or a supermajority shareholder vote to approve a sale. In some jurisdictions, statutory requirements impose additional procedural hurdles, including disclosures and fiduciary obligations that must be met before a transaction can close.

Franchise consents are critical in deals involving franchise businesses. Franchise agreements almost always include strict limitations on the transfer of ownership interests, requiring the franchisor’s prior written approval. Failing to obtain this consent can result in termination of the franchise rights, potentially rendering a core part of the business model inoperable. In sum, obtaining consents and approvals is not just a procedural step, it is often the first and most important gate to closing. Deal teams must map out a consent matrix early in the transaction timeline, proactively engage with stakeholders, and negotiate any required waivers or consents well in advance of closing to avoid costly delays or surprises.

Obtaining consents and approvals is not just a procedural step, it is often the first and most important gate to closing. Deal teams must map out a consent matrix early in the transaction timeline, proactively engage with stakeholders, and negotiate any required waivers or consents well in advance of closing to avoid costly delays or surprises.

For guidance, contact Vincent Costa at vcosta@cmmllp.com or 631-738-9100.

When it comes to running a corporation, planning for the unexpected is just as important as day-to-day operations. One critical but often overlooked safeguard is a well-drafted shareholder agreement.

Imagine a scenario where a shareholder unexpectedly passes away or decides to retire. Without a well-drafted shareholder agreement, the shareholders could face significant legal and financial challenges and expenses. These include disputes over ownership and control, leading to costly legal battles; valuation disagreements requiring expensive external experts; and complications in exiting the company, which may result in prolonged negotiations or litigation. Additionally, the absence of clear buy-sell provisions can leave shareholders facing unexpected tax liabilities or difficulties in handling the death or disability of a shareholder.

Ownership of a corporation is held in shares of stock. Shareholders or stockholders have the right to, and as a best practice should, enter into a contract that clearly explains the rights and responsibilities of each shareholder. These contracts can outline ownership interests, employment and payment rights, distribution rights, access to corporate documents, and any other agreements the shareholders want to make.

Notably, shareholder agreements can also preemptively address what happens when a shareholder dies, retires, or otherwise wants to divest their shares. In a recent matter handled by CMM’s litigation team and led by litigation partner David Green, owners of a corporation’s shares spent significant resources litigating over the value of the corporation so that one shareholder could sell their shares. The shareholder’s agreement was silent on any valuation methodology.

In contrast, a shareholder’s agreement can include a specific formula to determine valuation, or even a specific value per share. Spending the time, money, and resources upfront to assess and plan for a share sale would have saved the client tens of thousands of dollars in the long run. This real-life example underscores the importance of proactive planning.

Moreover, minority shareholders may be at risk of oppression without adequate contractual protections, and unclear roles or compensation structures for working shareholders can lead to internal disputes. Finally, without defined ownership of intellectual property or company assets, shareholders could face costly legal conflicts.

Maintaining a comprehensive and up-to-date shareholder agreement is crucial for any corporation. The best practice for any corporate shareholder is to create and regularly assess your shareholder’s agreement. Learn more:

• Annual Business Checkup: Preventing a Costly Business Divorce
• Annual Business Checkup: Operating Agreements
• Annual Business Checkup: Partnership Agreements

For more input and guidance on business divorce, reach out to David Green at 631-738-9100.

Thank you to Alex Tomaro for his research and writing assistance.

The phrase “hope for the best, prepare for the worst” has Latin roots, tracing back to “si vis pacem, para bellum,” meaning “if you want peace, prepare for war,” emphasizing the need to be optimistic, but prepared.

In the context of business relationships, this mindset is especially relevant. Business relationships often begin with shared goals, trust, and mutual interests, but disagreements, changes in circumstances, or evolving visions can lead to disputes, and possibly business divorce. To avoid legal issues and financial strain, it is crucial to be proactive and prepared. Regular assessments of key corporate documents are essential!

For corporations, the bylaws are the rules that generally govern the operation of the business. However, specific agreements between the shareholders should be further fleshed out in a separate shareholder agreement. The shareholder agreement should address everything from management structure to shareholder rights and dispute resolution mechanisms. As legal landscapes and business and personal relationships evolve, outdated agreements can create complications, misunderstandings, and unnecessary disputes. Being proactive helps ensure that all parties are on the same page, ultimately making the navigation of working relationships, the dissolution process, and any other disputes more efficient and less contentious.

For LLCs or other business structures where ownership is shared, the operating agreement is the central document. Some crucial elements to review in this document are the terms for dissolution and buyouts. If a partner wants to exit, how is the buyout structured? Are there clear formulas in place, or will a third-party valuation be required?

For partnerships, a clear partnership agreement is the first line of defense against the fallout from a potential business divorce. A properly drafted partnership agreement should articulate roles, responsibilities, and expectations, and most importantly, provide clear mechanisms for withdrawal, dissolution, and valuation of the business.

Financial mismanagement or disagreements can lead to significant legal issues. Clear and transparent financial agreements help prevent such problems. Key items to review include debt obligations, liability distribution, profit-sharing models, and capital calls or funding expectations. These financial agreements should be revisited annually to reflect the business’s current financial standing and to ensure clarity over financial responsibilities and expectations.

A business divorce does not have to be a messy, expensive ordeal if business owners maintain clear, well-drafted agreements and regularly review their governing documents. A proactive approach to legal maintenance ensures that your business is protected from conflicts, liabilities, and potential complications. By preparing for the worst while hoping for the best, you can safeguard your business’s future and avoid the costly repercussions of neglecting to check up on important governing agreements. Learn more:

• Annual Business Checkup: Shareholder Agreements
• Annual Business Checkup: Operating Agreements
• Annual Business Checkup: Partnership Agreements

For more input and guidance on business divorce, reach out to David Green at 631-738-9100.

Thank you to Alex Tomaro for his research and writing assistance.

UPDATE: On Friday, January 24, 2025, the Eleventh Circuit ruled in Insurance Marketing Coalition v. FCC, vacating the FCC’s one-to-one consent rule and sending it back to the agency. The court determined that the rule exceeded the FCC’s authority under the TCPA. Given that the rule would have introduced substantial new consent requirements for marketing calls, this decision provides a significant relief for calling parties. Stay tuned for additional updates.

The Federal Communications Commission (FCC) has introduced new regulations under the Telephone Consumer Protection Act (TCPA) which are set to go into effect on January 27, 2025. This new rule will directly impact businesses engaged in telemarketing, text messaging, and other forms of communication using automated systems. These changes are designed to strengthen consumer protection and ensure that companies obtain explicit, individualized consent from each customer before contacting them using automatic dialing systems or prerecorded voices.

Under the revised rule, sellers of information can no longer rely on a single customer consent provided by a lead generator. Previously, businesses could obtain consent through third-party partners, such as lead generators, which would then apply to all the telemarketers associated with the seller. Now, each seller must separately obtain consent from a consumer before making calls or sending texts that fall under the wireless number prohibition.

The key stipulation is that the marketer must clearly list the entities on whose behalf it is seeking consent. This means that while a marketer can still obtain consent for several sellers, it must be transparent about who is involved and ensure that consumers are fully informed about which company is seeking permission.

For a business to comply with the new TCPA rules, the consent it obtains must be “clear and conspicuous.” The FCC has defined this standard as meaning that the consent disclosure must be “apparent to a reasonable consumer.” The consent should not be buried in fine print, hidden behind hyperlinks, or difficult to read. However, determining whether a disclosure is “clear and conspicuous” can be complex, as it depends on the context and the specific interaction with the consumer.

The scope of communication that is permitted once consent is granted will be closely tied to the context in which it was given. The FCC has stated that calls and texts must be “logically and topically associated” with the reason the consumer initially provided consent. In other words, the content of the communication must be relevant to the purpose or context of the consumer’s interaction with the seller.

While the FCC has not provided a strict definition of what constitutes “reasonably inferred” content, it has suggested that businesses err on the side of caution. When in doubt, sellers should limit the content to what a consumer would clearly expect based on the purpose of the website or location where consent was provided. This means that businesses must carefully consider what is appropriate to send to a consumer and avoid overstepping the bounds of what the consumer likely expected when they gave consent.

For more guidance, contact Vincent J. Costa, Esq. at 631-738-9100.