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Just in Time For Summer: The Freeze-Out Merger, A Legal Option Available to SOME Majority Owners of Privately-Held Texas Companies

Originally published by Winstead.

Just in Time For Summer: The Freeze-Out Merger, A Legal Option Available to SOME Majority Owners of Privately-Held Texas Companies 1

By Zack Callarman and Mark Johnson

Our previous posts have stressed the critical importance of buy-sell agreements for both majority owners and minority investors in private companies (Read here). For majority owners, securing a buy-sell agreement avoids the potential of becoming “stuck” in business with a difficult co-owner without the ability to force a buyout of this minority investor’s ownership stake. For at least some majority owners of private Texas companies, however, another option exists. This option is commonly known as a “freeze-out,” “cash out” or “squeeze-out” merger.

What is a Freeze-Out/Squeeze-Out Merger?

A freeze-out/squeeze-out merger is a merger of two or more business entities that results in one or more of the equity holders of one of the pre-merger entities being cashed out as a result of the merger (i.e., not allowed to own equity in the post-merger surviving company).

Mergers are governed by state corporate law, and most states have several similar, but separate, merger statutes for corporations, LLC’s and other forms of business entities recognized under state law that govern mergers of those entities under various different circumstances. In that regard, it is worth noting that a “freeze-out/squeeze-out” merger is not a distinct type of merger governed by its own separate statute, but rather is a “characterization” given to a merger reflective of the purpose behind the merger, irrespective of the specific merger statute under which the merger is effectuated.

The Requisite Authorization and Approval for a Freeze-Out/Squeeze-Out Merger

Under state corporate law, mergers typically must be authorized and approved by both the equity holders and the directors of each of the entities participating in the merger. In the case of corporations, that means that typically both the directors and the shareholders must authorize and approve the merger, whereas in the case of LLC’s that means that typically the members and the managers must authorize and approve the merger. The actual level of that approval (i.e., unanimous consent vs. 2/3rds consent vs. majority consent) is governed by the applicable state merger statute together with the operative provisions of the entity’s organizational documents. By way of example, under Texas law, unless the entity’s governing documents provide otherwise, (i) the affirmative vote of at least two-thirds of the outstanding voting shares is required to authorize and approve a merger of a corporation, and (ii) the affirmative vote of the holders of at least a majority of the outstanding voting membership interests is required to authorize and approve a merger of an LLC.

So, the gating question for any individual or group wanting to possibly effectuate a freeze-out/squeeze-out merger is: Do you have the requisite vote under applicable law and under the entity’s governing documents to authorize and approve the merger?

The Fair Market Value Presumption
It is important to remember that while a freeze-out/squeeze-out merger may well enable the “majority” to force one or more minority holders out of the company, a freeze-out/squeeze-out merger does not entitle the majority to steal, or cheat the minority holders out of, their equity interests. The minority members who are being frozen or squeezed out should receive fair value for their interests. Otherwise, the majority proponents of the freeze-out/squeeze-out merger will likely be vulnerable to claims by the minority interest holders for oppression, breach of fiduciary duties, etc.

In the case of corporations, the “fair market value” presumption is governed by statute. In many (but not all) mergers involving corporations, under state corporate law, the effected shareholders, including any minority shareholders who will be frozen or squeezed out as a result of the merger, have statutory “dissenter’s rights” or “appraisal rights”. In short, a shareholder with “dissenter’s rights” or “appraisal rights” who objects to the amount that he is going to receive in exchange for his equity interests as a result of the merger is entitled to go to court and appeal the valuation. The court then has the power to revise the amount that the shareholder will receive based on its determination of fair market value.

Curiously, LLC statutes do not typically include dissenter’s rights provisions. However, given (i) the well–established fair market value presumption that exists in the context of corporate mergers, together with (ii) the strong “fiduciary duties” overlay that exists under statutory and common law with respect to the duties and obligations of members of LLC’s with respect to their fellow members, prudence dictates that the majority proponents of a freeze-out/squeeze-out merger make every effort to honor the fair market value presumption in any freeze-out/squeeze-out merger they effectuate.

Logistics of a Freeze-Out/Squeeze-Out Merger
So, assuming that the majority proponents of a freeze-out/squeeze-out merger have the requisite vote under applicable law and under the entity’s governing documents to authorize and approve the merger, how do they do it? The answer to that question will again depend in part on the form of the entities involved, the governing corporate statutes, and the organizational documents of the entities involved, but with those qualifications, the answer is pretty simple: The majority proponents form a new entity with whatever ownership and capital structure they desire, and then they merge the existing entity (i.e., the entity in which the soon-to-be frozen or squeezed out equity holders hold an interest) into the new entity. Under the terms of the merger agreement, among other things, the new entity will be the surviving entity, and the equity interests of the frozen or squeezed out minority interest holders will be redeemed for cash in an amount equal to the fair market value of the redeemed equity interests.

Conclusion

The freeze-out merger is a legal avenue that may not be widely known by majority owners of private companies, but it is used with some regularity in Texas and is rarely disallowed by the governance documents of most companies. There should be a note of caution for majority owners in deploying this technique, however, because if dissenter’s rights apply and are exercised by the minority investors in response, the freeze-out merger may result in a time-consuming and a costly appraisal process.

Zack Callarman (Associate) and Mark Johnson (Shareholder) are members of Winstead’s Corporate, Securities/Mergers & Acquisitions Practice Group.

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.



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Visitation With The Non-Custodial Parent

10 Tips To Help Your Child Enjoy Summer Visitation With The Non-Custodial Parent

By Dr. Linda Mintle for Kids & Divorce

Visitation With The Non-Custodial Parent

 

Summer visitation and holidays with a non-custodial parent can be a time of challenge for children of divorce. It may be unsettling for a child to vacation with a non-custodial parent. From the child’s point of view, he/she will be in strange places, with strange people, with a parent less familiar with daily habits and needs. This may create some fear and anxiety about the vacation time.

So if you are a non-custodial parent planning a vacation with your child, or you have custody and are wondering how to prepare your child to be with the non-custodial parent, here are some suggestions to make your child feel more comfortable.

10 Tips To Help Your Child Enjoy Summer Visitation With The Non-Custodial Parent

1. You and the non-custodial parent make vacation plans for your child together. As incredible as this sounds, it will be easier on your child if you both work together. Arrangements should be made in advance and agreed upon.

2. The itinerary for the trip must be shared. The custodial parent needs to know where the child will be–phone numbers and addresses. I know some non-custodial parents resist this idea but in case of an emergency, the custodial parent needs to know how to find his/her child.

3. Send copies of important medical information on the trip. The non-custodial parent needs to know how to handle a medical emergency or problem and have the pediatrician’s phone number, insurance information, and medical records.

4. Be careful not to put guilt on your child. Your child should never be made to feel guilty because he/she is going on vacation with the other parent.

5. Work out any disagreements about the vacation away from the child before the vacation. Don’t put your child in the middle of disagreements between you and your ex.

6. Plan for separation anxiety. Send a photo with your child. Include his/her favorite blanket, pillow, animal or toy. Discuss ways to communicate–email, telephone, postcards or letters.

7. Be positive about the vacation. Talk nicely about the non-custodial parent and help your child anticipate a great time.

8. Normalize fears and anxiety. Tell your child it’s normal to feel a little anxious. Hopefully, that anxiety will fade as the trip progresses.

9. Send a camera and smile at the time of pick-up. Now is not the time to bring up unresolved issues with your ex.

10. Pray. Keep the non-custodial parent and the vacation on your prayer list. Pray for protection and positive interactions between parent and child.

“Originally posted by Linda Ranson Jacobs on the Kids & Divorce blog at, blog.dc4k.org  Copyright © 2013, DivorceCare for Kids. Used by permission.”

The post 10 Tips To Help Your Child Enjoy Summer Visitation With The Non-Custodial Parent appeared first on Divorced Moms.

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child-centered summer activities

Single Mom Budget: 10 Fun & Inexpensive Child-Centered Summer Activities

child-centered summer activities

 

Growing up in a family of six children, raised by a single mother, vacations were few and far between. I cherish those moments and remember many inexpensive things done near home.

Airplane tickets were out of the question and with six kids, even a small vacation was expensive. My mom was often so busy, angry and exhausted that having a break, just to relax and enjoy time together wasn’t at the front of her mind but I wish it had been.

I want to create fun memories for Hidalgo, broaden his mind, help him become a well-rounded individual. This also means broadening experiences and getting out into the real world. I can’t afford to take him to multiple exotic summer homes but I can do lots of little things.

Here are 10 inexpensive Child-Centered Summer Activities

1.  Tent Camping:

If your only experience of camping is on a crowded campsite with dodgy plumbing this sounds horrible. There is a better kind of camping, in nature. Check the regulations at your nearest state/national forest, borrow or rent some basic equipment if you’re not convinced and try it with your kids. With a car, a map and some basic equipment, you can head to the hills.  Be surrounded by silence, tell stories and roast marshmallows over a campfire, take walks and explore in nature. Kids love it. I love it. Maybe you love it?

2.  Rent a cabin:

I’m a huge fan of state and national parks and forests. The low-cost resources available at them are second to none. Europe does not have the extensive land or preservation system of the U.S. and these are resources that can become a lifetime of vacation memories. If the thought of sleeping on the ground really creeps you out, cabins are very affordable. The rustic nature plus convenience of indoor plumbing get you out of your surroundings and into nature without going fully feral.

3.  Fishing:

Again, this one involves equipment (borrow at first), nature and a car. Don’t forget to the fishing license from your local bait shop (kids are free). I’m a bit of a tomboy and really like the thrill of catching my meal.  My love of it came from those tight money times when my mother crammed us into the car and drove us to the nearest lake to spend the afternoon angling for the big one. To this day, I have no idea if we needed that fish to supplement our meager rations or it was really a vacation. We just liked being outside, all together, focused on the wiggle of the pole and eating the spoils.

4.  Canoeing:

As you see, there is a theme building in terms of nature activities which involve equipment. I lived a few years in the Western part of the U.S. just after graduation when I had the least money but the most energy. I’ve tried many outdoor pursuits…kayaking, rock climbing, backpacking, hiking, fishing because they were cheap and fun. Many state parks and local outfitters rent equipment at reasonable prices. Who knows? You might love it so much you buy your own equipment and find a great new hobby. There are tons of things to do in nature.  Inspire your kids, Inspire yourself.

5.  Amusements:

Amusement parks, zoos, science centers, water parks, aquariums, and natural history museums are all fun and inexpensive activities. I don’t love them all but the little one thinks they are great. The ones in your town or near your town are probably good. Drive an hour and maybe the large city nearby has great options. I find it odd that people will spend lots of money to come all the way to France to see museums and exhibits but have never been to their local attractions. Check your city’s visitor guide. I bet there is stuff you haven’t seen or done yet.

6.  Ride the rails, Ride the ferries:

Depending on where you live, this is either very easy or near impossible. Public transportation is of poor quality in the states compared to Europe but there are places the trains go and if you buy early, they can be economical. Many large bodies of water are traversed by public and private ferry service. Think of a novel form of transport that gets you somewhere new. Kids like new experiences…riding a training even if it’s just a few towns over for a burger might be new to both of you.

7.  Build a fort:

When I was a kid, we were allowed to roam the neighborhood at all hours and discover the edges of our little world. We built kid camps just on the borders where the houses stopped and the ravines and wild places began.  Sadly, many kids don’t have this kind of freedom anymore. But a fort can be built over summer with found objects in your own back yard. Help as necessary for safety but let them do as much as they can on their own. If you’re lucky, they’ll sleep in it and give you some much needed quiet.

8. Join a local recreation center:

Join a local recreational center, like the YMCA, which offers affordable memberships and plenty of programs. My summer days were spent at the local city pool run by the recreation center. A pass purchased for a city-run activity is quite inexpensive.

9. Thank local heroes:

Take a tour of your police or fire station. Since most locations don’t have set visiting hours, call ahead to arrange an appointment. What better lesson for kids to learn than showing respect for and thanking their local heroes.

10. Build an obstacle course:

Build a backyard obstacle course with hula hoops, jump ropes, even a hose, then time the kids. The building and running the course, will teach them creativity and keep them occupied with a fun activity.

Having fun does not have to cost lots of money. I grew up poor but didn’t really know I was until the later years. Times were hard but my mother did the best she could with what she had. We had fun, we did stuff during the summers as a family and we enjoyed it. That’s how I want Hidalgo to remember his childhood.

The post Single Mom Budget: 10 Fun & Inexpensive Child-Centered Summer Activities appeared first on Divorced Moms.

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summer child care options

12 Summer Child Care Options for the Divorced Mom

summer child care options

 

Once I was divorced and did not have the financial resources I’d previously had to send my children to enriching or fun day camps and away camps, or hang out at a local pool with them all day long I had to sew together a patchwork quilt of summer child care options to get us through the summer while I worked.

It was always a near miss in which I was thinking, “Oh no, what will I do for this week or that week?” But, somehow, by using every single one of the options below plus some I may have forgotten, we made it through, mostly in one piece.

12 Options for Summer Child Care Options:

1. Counselor in Training: If your kids are 13 or 14, they may qualify for some counselor-in-training programs. I got my 14-year-old into one and it has served her well ever since (even though she opted not to continue that program the following summer). Most of these DO cost something. Swallow your pride and resolve to sit down with the financial aid application for these programs. We got an excellent deal. I did pay some of it, but my ex also chipped in seeing as he couldn’t babysit either.

2. Camps Offer Financial Aid: Even if you don’t think you qualify for summer camp financial aid, you might. I did not think I would, but I did qualify. No matter what the child’s age, there are camps all over the place and the issue is deciding which ones work for your kids and for your situation. Most of them offer scholarships and financial aid. Again, try to jump over the pride hurdle. And do your best to jump over the “I don’t have time to fill out the paperwork” hurdle. I say this in a loving way, of course. I had to give myself pep talks over and over again. I never liked asking for help, but, lo and behold, I needed help and so did my children. I did what I had to do.

3. Neighborhood Teens: Babysitters in my area make more than some of the divorced moms I know. However, one thing I have learned in business is that you can negotiate anything. ANYTHING! You just have to ask for what you need and tell people what you can and cannot afford.

4. Craigslist: Post for a sitter on Craigslist. I tried posting on college campuses but the youth in my area responded to the Craiglist posts. I had some excellent candidates. Of course, I couldn’t pay top dollar but they were still willing to work with me. Somehow, someway, you can find a sitter who will work within your parameters. This doesn’t come challenge-free, but you can find a solution—even if it is a stop-gap measure. One day I will write about the fiasco of hiring a sitter to pick up my 12-year-old child who refused to answer her phone and refused to be where she was supposed to be for pickup. That was one frustrated and unhappy babysitter. But, it worked for a little while.

5. Tweens can be Mother’s Helpers for Others: Line up mother’s helper gigs for tweens and younger teens. This worked for one summer with my middle child and has served her well.

6. Get a Job: I strongly suggested to my son that he get certified as a lifeguard. I had to make it all happen, but this has provided income for him ever since. Even now in college, he lifeguards on the side.

7. Swim Team: Swim team is a mixed bag. On one hand, your child gets good daily exercise and something to do. On the other hand, you’ve got those five-hour-long meets. And our teams wanted all parents to work the meets. Eventually, we had to bow out of that commitment. But for some of you, it might work out.

8. Grandma Camp!: First I had to package the idea of my kids coming to visit as “fun.” Then I had to package going to their grandparents’ house as a “vacation.” Somehow, when we could manage it, it all seemed to work.

9. Friends! I never would have thought of this one myself. However, I had several friends offer to have my kids come to stay for a week with them over the summer. Thank goodness for friends, is all I can say.

10. Vacation Time: Save your paid vacation time for summer as much as you can. It’s great to go away for holidays and all that but the summer is more pressing. You will probably be providing your own childcare for some of this time.

11. Dad Camp!: Don’t withhold time that the kids can spend with their dad. Use it! Let HIM do some of the work. You need a break. Also as a child of divorce, I can say that even though my dad was/is a piece of work and not the greatest dad, I still relished the time I spent with him. Parents can be jerks, but we still need them. Your kids will like extra time with dad as long as he isn’t truly neglectful (legal definition) or truly abusive.

12. Vacation Bible School: Hear me out on this one if you are not particularly religious. Most of the VBS’s I have observed operate much like any other preschool or daycare program. They color, they sing, the eat watermelon. It isn’t usually a bigtime dose of religion. And if you are desperate, churches are good for things like desperation. This is actually where they excel. They can be a safety net.

The post 12 Summer Child Care Options for the Divorced Mom appeared first on Divorced Moms.

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11 Tips for Managing Summer Vacation as a Divorced Parent

11 Tips for Managing Summer Vacation as a Divorced Parent

Tips and ideas to help make summer vacation simple and calm post divorce.

The post 11 Tips for Managing Summer Vacation as a Divorced Parent appeared first on Divorce Magazine.

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summer child care tips

6 Summer Child Care Tips For Single Moms

summer child care tips

 

When the kids were younger, Summer break was always a good time for us to spend a lot of quality family time together. We were able to make things work so that one parent was home, or we would enroll the kids in different programs that would work around our schedules.

When I became a single mom in 2015, life suddenly got so much harder trying to juggle the balance between work and family. I suddenly had to find alternatives for childcare so I could go back to work full-time just to support the three of us.

I dreaded the Summer because I had no idea what to do with the kids while I was working. They weren’t old enough to stay at home by themselves, childcare was getting so expensive for both kids, at a young age there wasn’t really many camps or programs they could join. It just became this big ordeal in trying to find something I could afford at their age.

I searched constantly for a work at home job or childcare that would work around my schedules. I juggled friends and family helping me watch the children or get them to where they needed to be. After looking for a few months, I finally found a job that after a few months would allow me to work at home. I live in a small town, so this was a huge deal for me.

Summer Child Care Tips

Plan, Plan, Plan

Summer break may not be the first thing on your mind, but it should be right up there on the list. Save up your vacation days and any earned time off work. Use those days off during the Summer when you may need them. Another option would be setting a little bit of money back each payday to go towards daycare or camp costs.

Ask about changing your work routine or schedule

Do you have a lot of college kids or younger adult coworkers that may be able to switch their hours or days around? Does your employer offer a work from home program that you can work towards? Don’t be afraid to ask your boss about changing your schedule or days to fit your summer break schedule. Be open and honest with your boss and maybe they can offer some help.

Ask Other Parents

You probably know or work with other parents. Start up a conversation about the kids and what they may be doing for Summer break. They may know of friends and family who own an affordable daycare or know of some not so expensive programs that you can enroll your child into.

If your child has made friends with a student who has a stay at home parent, check with them to see if they would be willing to help watch the kids during summer break while you work. You can set up a payment plan with them that would fit within your budget.

Ask Family

Check with your parents to see if they would be willing to help with summer care. Maybe they can watch the kids while you are working. They may also be able to help get the kids to different activities around town. My mom was able to help during the school year, luckily, she only lives 30 minutes away, so she was able to help on her days off.

Last Summer, our family who doesn’t live close, was able to take the kids for a few weeks at a time. This worked out well for both of us because they were able to spend quality one on one time with the kids and it gave me the opportunity to work without worrying. I could also work extra hours at that time for a bigger paycheck.

You can check with other members of the family as well. Maybe the kids have an aunt or uncle they can visit for some of the Summer.

Low-Cost Local Programs

Many places such as the YMCA, schools, and other organizations offer affordable day camps. This was another lifesaver for me. It was both affordable and they often ran until the late evening, so I didn’t have to worry about trying to get the kids from one place to another while I worked.

These programs often offer a low-cost option or can point you into the right direction of receiving financial help to pay for the program costs. Also, check with the state programs or local community or colleges to see what they offer. There is a local college here where they offer a discounted day program to qualifying families so that students get hands-on experience with kids for their degree.

High School Students and Siblings

When Summer hits, there always seem to be high school students looking to make a little extra money. This can be a good thing for working parents. You’ll often find this is cheaper than daycare or camp programs. Of course, you don’t just want any high schooler watching the kids so be sure to do your research and ask around to see if any friends or family can make a recommendation.

If you have older children who are responsible you can recruit them in as well. Since they are on summer break as well, they can babysit.

As kids get older it can get a lot easier to find things for them during the summer. Check with your local and state laws to see how old a child must be before you can leave them on their own. If they are old enough and responsible enough to take care of themselves that is another option. If they are at the right age, you can test their responsibility level throughout the year to see if you can trust them being home alone. Work on a few hours at first then move up to a weekend night. After you know they can handle it you can try it for a full weekend.

As a single mom, it can be tough throughout the Summer. Trying to juggle kids and work can be extremely hard and expensive. Start planning early and looking at different options to see what will work best for your family.

The post 6 Summer Child Care Tips For Single Moms appeared first on Divorced Moms.

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