Category: Insights on Home Page

“Legalized extortion!” That’s the most common response I hear from business owners when their businesses get dragged into a wage and hour lawsuit and forced to deal with opportunistic lawyers and federal and New York State laws that are heavily skewed against employers.

The way these laws are crafted encourages more lawsuits because in addition to any unpaid wages, employees can recover liquidated damages (essentially a double penalty), other penalties, interest, and even attorneys’ fees. Because of this, a case in which an employer may owe very little can turn into a mountain of damages very quickly.

In most cases — at least with the clients I represent, who tend to be various service industries such as restaurants, landscaping, and tradesmen — the business owners have paid their employees well and in the manner the employees requested (often in cash to avoid other obligations), treated them well and helped them out with personal situations such as loaning money, assisting with obtaining citizenship or helping their families. Likewise, the employers have given problematic employees multiple chances at keeping their jobs despite repeated performance issues.

Yet, typically after these employees leave or are terminated for one reason or another, they find their way to an attorney who can take advantage of the laws that heavily favor employees. Although the laws are designed to prevent abuse by employers, many of these cases tend to be more about poor record keeping by small businesses and lack of awareness of various technical legal obligations.

How can business owners avoid or at least minimize the risk of these lawsuits which can cripple their business? The most vital component comes down to recordkeeping. I’d say 90% of the businesses I represent have non-existent or mediocre record keeping at best. They either lack time records or payroll records, have no wage statements, no receipts if making payments in cash, no hiring notices, or all of the above and beyond. The businesses with minimal or no records are prime targets for lawsuits.

When an employee brings a lawsuit claiming they worked 15 hours a day, 75 hours a week and never got paid overtime or was not paid minimum wage, spread of hours, and so on, not having contemporaneous records disproving those allegations already puts the business owner in a very bad position even if the allegations are completely false, because there is a presumption favoring the employee in those circumstances. Having the records to disprove fabricated allegations by an employee could prevent a lawsuit in the first place (because the employee’s attorney won’t take the case if the likely recovery is minimal) or can significantly diminish the potential liability to the business which can aid in a quick resolution.

Taking steps such as:
(a) Hiring a payroll company to ensure accuracy in wage statements;
(b) Implementing a time clock system that requires all hourly employees to punch in and out daily;
(c) Requiring employees to sign off on the accuracy of weekly hours and pay;
(d) Having an employee handbook that lays out the start and end of the workday, how employees are paid, including tips if applicable (and having employees sign off on those policies);
(e) getting receipts (preferably signed by the employee) for any cash payments, are all critical measures for business owners to implement to prevent or minimize the risk of these lawsuits.

I can’t tell you the amount of times I wished an employer had any of the above to aid in the defense of a wage lawsuit. Being armed with these records can lead to a drastically different outcome in court.

The other key factor to preventing wage lawsuits is knowledge. There are so many obscure wage laws, whether it be federal, state or even more localized, like New York City. It’s extremely difficult for small business owners trying to run a business to keep up with constantly changing laws. That’s where having the right legal advisors in place is crucial. Not staying on top of ever-changing laws makes business owners sitting ducks for attorneys looking for their next class action victim.

For guidance on labor and employment issues, contact Jeff Basso at jbasso@cmmllp.com.

As a business owner, you likely sign or send out contracts on a regular basis many of which include “standard” arbitration clauses buried at the end and rarely questioned. But as more companies find themselves navigating costly and time-consuming arbitration proceedings, it’s become clear that these boilerplate provisions can have real financial and strategic consequences. This article is designed to help business owners understand why arbitration may not always deliver the efficiency it promises, what alternatives exist, and how a more deliberate approach to dispute resolution clauses can better protect your company’s time, money, and flexibility.

In practice, arbitration administered by the American Arbitration Association (“AAA”) can now feel a lot like court litigation, only more expensive. Filing fees can reach five figures before a single hearing is held. Discovery can expand beyond what was once “streamlined,” with document production, depositions, and motion practice resembling full-blown litigation. The scheduling process, arbitrator availability, and procedural steps often stretch timelines well past what clients expect from “private dispute resolution.”

That’s not to say arbitration is without merit. It still offers privacy, the potential for subject-matter expertise from the arbitrator, and (in some cases) finality without appeal. But it’s no longer a given that AAA arbitration is the right fit for every contract or every dispute.

Other reputable national providers, including JAMS and NAM, often offer more flexible rules, faster administration, or lower filing fees. Some allow parties to agree on modified procedures or streamlined timelines. And in some cases, the best course of action may be to forego arbitration entirely and preserve access to the courts, especially where injunctive relief, third-party discovery, or appellate rights may be critical.

The broader lesson for business owners is that dispute resolution provisions require deliberate attention at the drafting stage, not merely insertions by default. Consider the types of disputes that could arise, the potential costs, and the benefits of flexibility. You might want a very formal arbitration, or a more streamlined arbitration option. You might want to preserve the right to go to court while protecting venue, governing law, and jurisdiction. Mandatory mediation followed by arbitration or litigation can also be an effective approach for certain claims.

Contracts are a tool to manage risk, yet one of the greatest risks in commercial disputes today is being locked into an inefficient or costly forum simply because “that’s what everyone uses.” As dispute resolution evolves, so should our approach to arbitration clauses. Thinking strategically about arbitration and litigation at the outset can save time, money, and stress down the road. It can give you greater control when disputes inevitably arise. Choosing the right approach depends on your business, your deals, and the types of disputes you may face. Investing in careful contract language now protects both your business and your bottom line in the long run. This type of critical analysis is no longer optional – it’s a competitive advantage.

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

Employees are often one of the most valuable and sensitive aspects of any mergers and acquisitions (M&A) transaction. While companies may focus on financial and operational synergies, overlooking the employment and compensation landscape can lead to legal complications, cultural disruption, and retention issues. People-related risks must be carefully assessed and addressed to ensure a smooth transition, preserve morale, and avoid costly liabilities.

One of the most immediate challenges is the potential for change-of-control payments. Executive employment agreements, particularly for senior leadership, often include provisions for bonuses, severance packages, or other compensation triggered by a sale or merger. These payments, sometimes referred to as “golden parachutes,” can be substantial and may require special approvals under tax laws or corporate governance rules. In public companies, they may also require shareholder disclosure or votes under securities regulations.

Beyond executives, many companies implement retention plans or offer equity-based compensation such as stock options or restricted stock units (RSUs). In an M&A context, these awards may accelerate automatically upon closing, meaning employees receive immediate vesting of their unvested equity. This can significantly increase transaction costs and lead to unintended consequences—such as employees leaving post-closing after cashing out. Buyers may need to negotiate modifications, implement new retention programs, or factor these expenses into the purchase price.

For businesses with unionized or heavily regulated workforces, labor law requirements introduce an additional layer of complexity. Collective bargaining agreements (CBAs) may require formal notice to, and in some cases consultation with, labor unions prior to a transaction. In certain jurisdictions, failure to follow these procedures can result in legal action, regulatory penalties, or strike activity. Even in non-union environments, laws such as the WARN Act in the U.S. may impose notification requirements for mass layoffs or plant closures related to the deal.

Another critical concern is benefit plan continuity. Health insurance, retirement plans, and other employee benefits may not automatically carry over in a transaction—particularly in asset sales, where the legal entity does not remain intact. Buyers must determine whether to assume, replicate, or terminate existing plans, and must ensure compliance with applicable laws such as ERISA (in the U.S.), tax codes, and non-discrimination rules. In cross-border deals, local benefit laws and employment protections may vary significantly, requiring jurisdiction-specific planning.

Ultimately, managing employment and compensation issues in an M&A transaction requires a strategic and legally sound approach. HR teams, legal counsel, and advisors must work closely together to conduct diligence, evaluate employment liabilities, communicate with employees, and structure retention and incentive programs aligned with the post-closing business goals. By anticipating and addressing these issues early, parties can protect the workforce, preserve deal value, and pave the way for a successful integration.

M&A Deals: Here’s What You Need to Know
Consents and Approvals: The First Gate to Closing an M&A Transaction
How Commercial Contracts Can Make or Break Your M&A Deal
What Really Keeps M&A Deals on Track? A Closer Look at Governance and Fiduciary Duties
The Overlooked Obstacle in M&A: Existing Debt and Its Hidden Risks

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

Most of us have read the horror stories of lawyers haphazardly using AI to draft briefs, motions, and other filings which rely on cases that do not exist or, if they do, say something completely different than what the attorney claims. This has led to attorneys being disciplined, sanctioned and ridiculed.

In an effort to ensure that judges and court staff don’t meet the same fate, the New York State court system rolled out a new interim policy on the use of AI. The policy, which applies to all judges and non-judicial employees within the NYS Unified Court System, is intended to establish “guardrails to ensure fairness, accountability, and security in the use of AI, particularly generative AI, by our workforce.” Chief Administrative Judge Joseph A. Zayas stated in a press release regarding the policy, “While AI can enhance productivity, it must be utilized with great care. It is not designed to replace human judgment, discretion, or decision-making.”

While the new policy cites to the benefits of generative AI, it also warns that “factual assertions or citations to legal authority included in the [AI] output may be inaccurate or unreliable,” and that AI programs “occasionally fill in gaps in their source material by simply fabricating facts or citations.” The policy goes on to warn about bias and inappropriate output by generative AI as well as the vulnerability of confidential information if sensitive case information is inputted into AI and becomes publicly available.

This new policy contains guiding principles, essentially laying out that each judge bears the ultimate responsibility for the content of their opinions and orders, and that AI cannot be used to actually make decisions. Additionally, the rules that normally govern confidentiality for judges and court staff apply to the use of AI as well – so basically don’t input any specific identifying case information into AI software that could then become public. There are also several requirements and restrictions governing how AI is to be used, what software can be installed, and what information can be entered.

Overall, this new AI policy is a great first step to ensuring the general public and those in the legal industry that the courts in New York will continue to ensure fairness and act responsibly and ethically as the use of AI continues to evolve.

Read the full policy here.

Like the summer months, significant events in legal history occurred in September. On September 3, 1783, the Treaty of Paris was signed in Paris by representatives of the Colonies and Great Britain which formally ended the Revolutionary War; On September 8, 1974, President Gerald Ford granted an unconditional pardon to former President Richard Nixon; the Emancipation Proclamation was signed by President Abraham Lincoln on September 22, 1862; the Judiciary Act of 1789, which established the federal courts, was passed by Congress on September 24, 1789; the Bill of Rights was adopted by Congress on September 25, 1789; and on September 17, 1787, the Constitution was signed and thereafter sent to the States for ratification.  There are numerous additional significant legal events which occurred in the month of September, and each is deserving of a full article.  This article will focus on the Constitutional Convention, which took place in Philadelphia from May 25, 1787-September 17, 1787.

The story of the Constitutional Convention and the Constitution does not begin with the Convention in Philadelphia. The Articles of Confederation, which was agreed upon in 1781, did not create an executive or national courts; only a weak Confederation Congress was created.  That Congress did not have the power to levy taxes, regulate trade, or raise an army.  So weak was it that in 1785, during a dispute between Maryland and Virginia regarding trade, fishing and navigation rights on the Potomac River, without fear of reprisal, George Washington hosted, at Mount Vernon, Commissioners from both States to negotiate a resolution.  Such a meeting was in violation of the Articles of Confederation which prohibited any two States from entering into an agreement without the consent of the Confederation Congress.[i]  Shays Rebellion is another example of the weakness of the Confederation Congress.  Shays Rebellion was a violent uprising in western Massachusetts during 1786 and 1787.  At that point in time, the Articles of Confederation had been in place for about 6 years.  After the Revolutionary War, people struggled to pay debts, creditors refused to give loans and demanded payment in advance, taxes were increased, and high interest rates were charged for loans.  As a result, among other things, farmers began to lose their land and property to creditors.  Continental Army Captain Daniel Shays led an uprising against dept collection.  The Confederation Congress, which was meeting in New York, authorized raising federal troops to put down the uprising, but the various States refused to pay for the troops.  A privately funded militia was organized in Massachusetts that ultimately restored order.  George Washington noted that “Without some alteration in our political creed, the superstructure we have been seven years raising at the expense of so much blood and treasure, must fall.  We are fast verging to anarchy and confusion!”  Under the Articles of Confederation, the States had too much power and the national government had too little.  The result was the Constitutional Convention of 1787.  Congress approved the convention in February 1787 and by March all but 3 States had elected delegates. 

The Convention was to begin May 14, 1787, in Philadelphia.  James Madison was the first delegate to arrive (May 3, 1787). When the Convention began, Edmund Randolph, the Governor of Virginia, presented the “Virginia Plan” which consisted of 15 resolutions forming an outline of a constitution.  These resolutions were the focus of debate and negotiation in the ensuing months. A contentious issue faced by the delegates was how to incorporate the States within a strong central government envisioned by the Virginia Plan, and the debate on that issue started with how to allocate representatives in Congress.  The Virginia Plan proposed to eliminate the one state/one vote system existing under the Articles of Confederation and replace it with voting by each individual representative and that legislators would be apportioned by “the number of free inhabitants.”  And thus, started what was likely the most contentious issue of the Convention and pitted small states against large states. Notably, small States outnumbered large States at the Convention and the Convention voted by State. The debate raged for about two months and, as did most issues faced during the Convention, ended with compromise.  James Wilson of Pennsylvania made a deal with South Carolina to secure its support for representation in one branch of Congress based on population by what has been called the 3/5 compromise.[ii]  This proposal initially passed by a vote of 9-2. How to determine representation in the Senate was next to be determined and Benjamin Franklin proposed the “Great Compromise” which called for proportional representation in the House and equal representation in the Senate.[iii]

It took the delegates until the end of July 1787, more than two months after the Convention opened, for them to turn to the Chief Executive/President.  Questions that persisted were the length of the term, how to elect the President, could the President run for additional terms, could a “bad President be removed, and should he have veto power over legislation. Gouverneur Morris[iv] described the significance of the debate: “It is the most difficult of all rightly to balance the executive.  Make him too weak: the legislature will usurp his powers.  Make him too strong: he will usurp the legislature.”[v]  Again, debate ensued followed by compromise.  James Wilson proposed the elector system which helped the Southern States because while slaves could not vote, they would be counted when allocating electors. The elector system gave the people a role (electing the electors) appeased both the Southern States (3/5ths Compromise) and the large States (number of electors based on total number of representatives n the House and Senate).  The delegates recognized flaws in the provisions related to the President and anticipated amendments to address the flaws.  The 12^th, 22nd and 25^th Amendments each address some of those flaws.

Slavery came up again in connection with certain navigation acts and the authority of Congress.  The Fugitive Slave Clause (Article IV, Section 2, Clause 3) was agreed upon to secure eliminating a 2/3 majority voting requirement for certain navigation/trade acts.  Rufus King described the issue of slavery as one of the Constitution’s “greatest blemishes” and Madison stated that as “Great as the evil is, a dismemberment of the union would be worse.”[vi]

Gouverneur Morris, who drafted the Constitution’s preamble, described the Constitution as being based on compromise: “Each state [was] less rigid on points of inferior magnitude than might have been otherwise expected.  And thus the Constitution which we now present is the result of a spirit of amity and of that mutual deference and concession which the peculiarity of our political situation rendered indispensable.”[vii]

On Saturday September 15, 1787 the final roll call vote occurred and the draft Constitution was approved 10-0 (Rhode Island, New York and North Carolina did not vote).  The Constitution was signed Monday September 17, 1787 and then sent to the States for ratification.

[i] Articles of Confederation, Article VI

[ii] The 3/5 “Rule” was initially proposed in 1783 by the Confederation Congress in connection with apportioning tax burdens but was never implemented.

[iii] See, Federalist No. 37

[iv] Gouverneur was a delegate from Pennsylvania but his family was originally from New York, in what is now known as the Morrisania section of the Bronx

[v] Stewart, David O., The Summer of 1787, Simon & Schuster, 2007, p. 157

[vi] Ibid, p. 205

[vii] Ibid, p. 236

M&A transactions rarely occur in a financial vacuum. Whether the target company is being acquired through an asset or equity purchase, its existing debt structure can introduce a host of legal and logistical challenges that must be carefully addressed. Overlooking these issues can lead to covenant violations, unanticipated costs, or even post-closing legal disputes.

One of the most immediate concerns is the risk of covenant breaches. Most commercial loan agreements contain a range of restrictive covenants that limit the borrower’s ability to sell assets, merge with another company, or incur new debt without the lender’s prior consent. An M&A transaction, especially one that involves a change of control or significant restructuring, can easily trigger these restrictions. Violating a covenant can result in an event of default, acceleration of the debt, or a requirement to repay the loan in full. As such, early review of credit agreements and open communication with lenders are essential.

Another common issue is prepayment penalties. If existing debt must be retired as part of the transaction, the borrower may be required to pay fees or premiums for early repayment. These penalties, often buried in the fine print of loan agreements or bond indentures, can materially impact the economics of a deal. Buyers and sellers must factor these costs into their financial modeling and, where appropriate, negotiate with lenders to reduce or waive them.

For companies with layered or syndicated financing, intercreditor consents add another level of complexity. Intercreditor agreements often give certain classes of creditors—typically senior lenders—rights to approve or block changes to the capital structure, asset sales, or collateral arrangements. Coordinating these consents across multiple stakeholders can be time-consuming and politically sensitive, particularly if some creditors view the transaction as unfavorable.

Finally, asset-based loans and secured financing arrangements often involve security interests in the target’s property, equipment, accounts receivable, or intellectual property. As part of the M&A process, these security interests must be released, a legal process that may involve obtaining lien releases, UCC-3 termination statements, or other documentation. Once the buyer acquires the assets or equity, it must re-perfect the security interests in its own name if post-closing financing is involved. This requires careful coordination with legal counsel, lenders, and filing offices to avoid gaps in collateral coverage.

In short, the intersection of M&A and existing debt obligations is a complex but critical area of legal diligence. A proactive approach—one that involves identifying all outstanding debt instruments, understanding their restrictions, engaging with lenders early, and planning for refinancing or consent logistics—can help avoid costly disruptions and ensure that financing doesn’t become a roadblock to a successful closing.

M&A Deals: Here’s What You Need to Know
How Commercial Contracts Can Make or Break Your M&A Deal
What Really Keeps M&A Deals on Track? A Closer Look at Governance and Fiduciary Duties
Consents and Approvals: The First Gate to Closing an M&A Transaction
Employment and Compensation Issues in M&A Transactions

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

While external factors such as regulatory approvals and contract consents often dominate M&A discussions, a range of internal corporate governance and fiduciary obligations can be equally critical, and equally capable of derailing a transaction. The governing documents, shareholder rights, and board responsibilities within the buyer and seller entities create a legal framework that must be carefully navigated to ensure the deal is valid, enforceable, and free of post-closing disputes.

At the heart of this framework are the fiduciary duties owed by directors and officers, particularly those of the selling company. In sale scenarios, these fiduciary duties—primarily the duties of care and loyalty, require directors to act in the best interests of the company and its shareholders. For public companies, this includes conducting a robust sale process, evaluating offers fairly, and avoiding conflicts of interest. Any perceived failure to uphold these duties may expose board members to litigation, often in the form of shareholder derivative suits or class actions. In private companies, while the scrutiny may be lower, legal risk still exists, particularly when controlling shareholders or insiders stand to benefit from the transaction.

Another key governance issue involves appraisal and dissenters’ rights, which are typically granted to minority shareholders under corporate law statutes in many jurisdictions. These rights allow dissenting shareholders to oppose the deal and demand a judicial determination of the “fair value” of their shares, which could exceed the agreed-upon purchase price. While relatively rare in amicable transactions, these claims can introduce legal complexity, delay post-closing integration, and create contingent liabilities for the buyer.

The deal process may also be constrained by charter and bylaw provisions that create procedural or structural barriers to a transaction. These include anti-takeover mechanisms such as poison pills, which dilute share value upon a triggering event, or staggered boards, which prevent full board turnover in a single election cycle. Although these provisions are often intended to protect companies from hostile takeovers, they can also slow down or block friendly transactions if not addressed early. Even seemingly benign requirements—such as supermajority voting thresholds or notice periods—can complicate timelines and introduce legal risk if improperly followed.

To navigate these challenges, buyers and sellers must conduct thorough reviews of their respective governance frameworks early in the deal process. This includes analyzing corporate charters, bylaws, shareholder agreements, and board policies to identify and mitigate potential roadblocks. In many cases, advance planning—such as securing board resolutions, amending governing documents, or negotiating waivers—can neutralize these internal obstacles and ensure compliance with fiduciary and legal obligations. Proper governance not only protects the transaction from challenge but also reinforces the legitimacy and transparency of the overall deal process.

M&A Deals: Here’s What You Need to Know
How Commercial Contracts Can Make or Break Your M&A Deal
Consents and Approvals: The First Gate to Closing an M&A Transaction
The Overlooked Obstacle in M&A: Existing Debt and Its Hidden Risks
Employment and Compensation Issues in M&A Transactions

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

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.

M&A Deals: Here’s What You Need to Know
How Commercial Contracts Can Make or Break Your M&A Deal
What Really Keeps M&A Deals on Track? A Closer Look at Governance and Fiduciary Duties
The Overlooked Obstacle in M&A: Existing Debt and Its Hidden Risks
Employment and Compensation Issues in M&A Transactions

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