A LEGAL CHECKLIST FOR BUSINESSES--CORPORATE AND CONTRACTS
Is your company adequately protecting its rights? Our last article provided a checklist for Employee and Intellectual Property matters. This one does the same for Corporate and Contract matters. These checklists cover many important points that often are overlooked, although no checklist can cover everything.
BOARD AND SHAREHOLDER MEETINGS FOR CORPORATIONS Have an annual shareholder meeting to elect directors–and keep minutes of that meeting. With respect to the board of directors, have minutes for board meetings or have unanimous written consents for major decisions regarding the company. These can be written up later if everyone on the board concurs, but it is better to do them at the time the resolutions are needed.
REGISTRATIONS IN OTHER STATES If you have offices in other states, make sure you register your business in those states.
SECURITIES LAWS Before offering or giving stock, stock options or promissory notes with stock-conversion rights, contact an attorney to make sure you obtain the proper securities-laws exemptions.
BUY-OUT AGREEMENT AMONG OWNERS The shareholders generally should have an agreement where, before a shareholder can sell or transfer shares, the company and the other shareholders have a right to buy them first. The shareholders may also want an agreement that provides buy-out provisions if a shareholder leaves the company or is terminated from it.
LOANS TO AND FROM PRINCIPALS With loans between the company and a principal:
STOCK-OPTION PLANS If you are choosing a stock-option plan, consider:
INTEGRATION AND MODIFICATION Each of your agreements should have provisions stating that:
DISCLAIMERS OF WARRANTY AND LIMITATIONS OF LIABILITY If you provide goods or services, your agreements should:
ASSIGNMENT If you do not want the other party to be able to assign its rights (for example to a competitor or to a company which may not be financially sound), your agreement should expressly say so.
INTERNET If you sell on the Internet or out of state, your agreements should:
TERMS AND CONDITIONS If you use terms and conditions with purchase orders or order acknowledgments, have an attorney review the provisions so that, if there is a conflict between your terms and the other party's terms, yours are more likely to prevail. Alternatively, it may be more practical to use signed written contracts instead (which are much less likely to result in a "battle of the forms").
LETTERS OF INTENT If you use letters of intent, they should expressly state whether they are binding or not.
INTERNATIONAL AGREEMENTS Unless you are sure you want it, your international agreements should expressly exclude application of the United Nations Convention on Contracts for the International Sale of Goods. It applies automatically otherwise. If you are dealing with people or businesses with no assets in the United States, your agreements should include an international arbitration provision. It is much easier to get a foreign court to enforce those than judgments obtained in the U.S. court system.
FORM CONTRACTS If you use form agreements, be sure they are reviewed and updated periodically to meet changes in business needs and law.
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