New Jersey Lawyer & Attorney : Stark & Stark Law Firm : New Jersey Law Blog

Before purchasing a business, the proposed buyer of company should request and review extensive documents about the target company’s ownership, function, income, assets, obligations and liabilities.  That process, called “due diligence” affords the buyer the last real chance understand exactly what he or she is buying. 

The importance of conducting due diligence in an organized and exhaustive way cannot be overstated.  Failure to do so could lead the buyer to unknowingly purchase a company that is not viable under new ownership, or a company that is facing serious legal or financial issues. Therefore, to ensure the benefit of the bargain, the shrewd buyer should take full advantage of due diligence.

Having represented clients in both local business and multinational corporate acquisitions, I’ve realized that the due diligence process for each is surprisingly similar. That is because no matter the size of the target company, buyers have universal concerns about the target company remaining profitable under new ownership. 
 
Depending upon the nature of the transaction, such as in the case of a small business owner who does not want to upset the employees, the sale purchase agreement may require the buyer to conduct due diligence discreetly by, for example, visiting the business off-hours or by only contacting a designated individual for follow-up.  Due diligence may also require a personal visit to the target company, or even the seller opening all of its files for review in a designated place (usually a conference room or online on a secure website).

Ideally, a trusted professional should issue the due diligence requests, and then review all of the responsive documentation. An experienced attorney can be invaluable in that respect by knowing exactly what documents to seek, by helping the buyer to identify irregularities in the responses, and by drawing  the buyer’s attention to the important risks of the deal.  It may also be beneficial to have an accountant review the financial documents provided in due diligence to advise the buyer as to the target company’s financial health.

In order to capture the complete picture of target business for the buyer, the due diligence requests and documentary responses should at least address the following aspects:

Corporate Documents
The buyer should review and understand the implications of all of the governing documents for the target company along with minutes of the board of directors or shareholders, Certificates of Good Standing; stock certificates and stock ledgers.  That way, the buyer can understand how the company has operated and how it should continue to operate under new ownership.

Intellectual Property
Name recognition is always an issue.  Therefore, the buyer should review evidence of any trademarks, trade names, service marks, patents or copyrights that may be registered, pending, rejected, searched, or even contemplated by the target company.  The buyer should also seek a list of all know-how, trade secrets and technical information material to the target company’s business to make sure that the buyer will be able to continue to operate the business after the acquisition.

Furthermore, the buyer should analyze the way the target company has protected the intellectual property, and should review all contracts or documents relating to the protection of proprietary information such as agreements with independent contractors, confidential information policies and non-disclosure agreements.  Otherwise, the intellectual property may not be worth very much if it has been or may easily be disclosed to the public.

Material Contracts and Agreements
The buyer needs to know if the target company is contractually obligated or restricted from taking action after the acquisition, and whether or not the target company may assign all of its business contracts to the buyer as the new owner. For example, if most of the target company’s revenue stems from a service contract with a local government, the buyer should ensure that the target company will be able to continue providing services under that contract even after the buyer becomes the new owner.

It is therefore imperative for the buyer to review all of the contracts that affect the target company’s performance.  Some examples include the target company’s credit agreements, mortgage agreements, financial or performance guaranties, notes, indemnifications, sales & service agreements, non-solicitation agreements, non-compete and marketing agreements.

Litigation
Thorough due diligence includes a search to determine if the target company is subject to or even threatened by litigation that may be extremely expensive to defend.  While the claims facing the target company may be of little substance, the buyer should at least know what to expect, and to make sure that he or she is properly indemnified against the cost of pre-existing claims or litigation in the sale purchase agreement. 

Employees
The buyer should be able to identify at least the key employees to understand how each one contributes toward the target company’s daily operations, in addition to understanding how the employees are (and may continue to be) compensated. In that respect, the buyer should review all: employee lists, employment agreements, benefits policies, retirement plan policies and compensation schedules.

Financial Information
It is often advisable for the buyer to have an accountant review the target corporation’s income tax returns and financial statements to evaluate the target company’s financial health, to determine if there are any tax issues, and perhaps to advise if the purchase price is fair under those circumstances.

Property
Because the target company’s real and personal property may be the most expensive aspect of the deal, the buyer needs to know all of the details surrounding such property.  Buyers therefore often seek bills of sale, deeds, appraisals, depreciation schedules or restrictions on that property.

Insurance
The buyer or the buyer’s attorney should review all material insurance policies affecting the target company, and should ensure that the policies are appropriate and up-to-date.

Governmental Regulations
Finally, all target companies answer to a higher authority . . . the government.  Therefore, the buyer may request OSHA, EPA, IRS, EEO, or other governmental agency inquiries, as well as copies of all permits and licenses necessary to conduct the company's business.

After conducting due diligence, the buyer should have a full understanding of the target company and its relative value as a going concern.  If the buyer chooses not to conduct extensive due diligence, well, caveat emptor.

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New Jersey is among a minority of states that require divorced or separated parents to fund their children’s higher education expenses.

Since the case of Nebel v. Nebel, 103 N.J. Super. 216 (App. Div. 1968), the New Jersey Courts have found that financially able parents must contribute to their children’s college expenses. In that case, the Court allowed the custodial mother to select a private college on behalf of her son, but determined the father’s contribution based on tuition at state universities. In Finger v. Zenn, 335 N.J. Super. 438 (App. Div. 2000) the Court overturned Nebel in part, and held that the contribution of financially capable parents ought to be calculated on the tuition at the university in which the child is actually enrolled, whether public or private.

The Court, in Newburgh v. Arrigo, 88 N.J. 529 (1982), delineated the specific criteria to be considered in determining whether parents are legally obligated to fund higher education expenses:

• Whether the parent, if still living with the child, would have contributed toward the costs of the requested higher education;
• The effect of the background, values and goals of the parent on the reasonableness of the expectation of the child for higher education;
• The amount of the contribution sought by the child for higher education;
• The ability of the parent to pay that cost;
• The relationship of the requested contribution to the kind of school or course of study sought by the child; • The financial resources of both parents;
• The commitment to and aptitude of the child for the requested education;
• The financial resources of the child, including assets owned individually or held in custodianship or trust;
• The ability of the child to earn income during the school year or on vacation;
• The availability of financial aid in the form of college grants and loans;
• The child’s relationship to the paying parent, including mutual affection and shared goals as well as responsiveness to parental advice and guidance;
• The relationship of the education requested to any prior training and to the overall long-range goals of the child; and
• Contribution made to household expenses by the current spouse of either parent [Hudson v. Hudson, 315 N.J. Super. 577 (App. Div. 1998)].

Generally, Courts will hold all financially able parents responsible for contributing to the college expenses of qualified students. However, in instances where children have had no relationship with a parent, and the parent is not involved in the child’s decision to attend college and where, Courts have held that parent not responsible for the child’s higher education expenses. For example, in Moss v. Nedas, 289 N.J. Super. 352 (App. Div. 1996), the Court refused to hold the father responsible for any portion of his daughter’s college expenses after finding that she had excluded him from all of the decisions leading up to her enrollment.

The responsibility to contribute to higher education expenses may not end with the completion of a four-year college program. In Ross v. Ross, 167 N.J. Super. 441 (Ch. Div. 1979), the Court required the father to continue child support payments for his daughter until she completed law school.

The responsibility also does not end with the death of a parent. In Kiken v. Kiken, 149 N.J. 441 (1997), the Court held the father’s estate responsible for contributing to his son’s undergraduate college expenses.

Technorati Tags: New Jersey : Divorce : Education Costs

 

 

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Your divorce has ended and your attorney has told you that it is now time to prepare a Qualified Domestic Relations Order in order to divide you and your spouse’s retirement accounts.

What is a Qualified Domestic Relations Order?

Qualified Domestic Relations Orders (QDROs) enable distributions to be made from retirement plans such as defined benefit or pension plans, defined contribution plans, individual retirement plans (IRAs), annuity plans, etc. to the spouse or former spouses of the plan owner provided that such orders are qualified. The spouse or former spouse is known as the “alternate payee” and has the right to receive a portion or the entire benefit payable to the spouse who is actual owner of the retirement plan. The owner of the retirement plan is known as the “participant”.

Why do they need to be qualified?

The Order needs to be qualified by the plan that administers the retirement plan in order to insure that the benefits the alternate payee receives are taxed appropriately.

What does it mean to be qualified?

The Order becomes qualified when they meet the various requirements set forth by the Internal Revenue Service and federal regulations which set forth the basic guidelines for all QDROs. Essentially what this means is that the QDRO must be designed in such a way so as to insure that the distribution to the non-owner spouse is divided and deposited in an account without any immediate tax consequences to either party. So what the QDRO does is create a separate account or interest for the alternate payee without having any effect on the participant other than assigning a portion of his or her benefit away to the alternate payee. Therefore, the recipient spouse is not taxed on the receipt of the distribution and the participant is not taxed on the withdrawal of the distribution.

Can QDROs be used to enforce child support obligations?

The other, although not frequently used advantage of QDROs, is using them to enforce collection of child support obligations. A QDRO can be used to collect child support arrears or be used to secure payment for child support obligations regardless of whether or not the participant’s retirement plan is in pay status. The timing of when a QDRO can be used to enforce child support orders differs from plan to plan, but many plans provide methods in which a QDRO can be used to pay child support obligations even if the participant is far away from retirement.

What does my attorney need to prepare a QDRO?

You should provide your attorney with the name, address, and social security number of the participant, as well as a copy of the summary plan description for the retirement plan, the plan’s written QDRO procedures, if available, and a most recent annual benefits statement indicating the current value of the plan. If you do not have access to this information at the onset of your divorce matter, you will need to make sure that the owner spouse provides this information to your attorney during the discovery stage of your divorce matter. 

Technorati Tags: New Jersey : Divorce : QDRO

 

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In every divorce, there are financial issues. These issues may involve equitable distribution of assets, alimony, and/or child support. Many times it is difficult for an attorney to obtain the financial information needed from a client. If the client is no longer living in a marital home and does not have access to the records, or if the client was not the financial person in the family, it may be very difficult for them to give a complete picture of the assets and debts.

If you are contemplating divorce and if you are still living in the marital home, you should photocopy as much information as possible. It is important for you to make an all inclusive list of every asset, whether it be in your name individually, your spouse’s name individually, or in joint names. Some assets are easy to determine and some are not. It is best if you can do the foot work by trying to find out (1) the name and account number of every bank account, (2) name and number of shares of every stock or bond, (3) face amount, owner, beneficiary, and insured of life insurance contracts, (4) year end balance of pension plans and retirement accounts, (5) the name of any business that you or your spouse are involved in, (6) the name and account number of every credit card used by either you or your spouse, (7) a copy of your most recent mortgage statement, and (8) the names, account numbers and current balances of any home equity or personal loans.

Even if you do not have complete information for everything, approximate values or estimates of what is owned is helpful. Your attorney can more easily obtain the remaining information through the legal process of discovery if he or she knows in which direction to proceed.

Almost every party going through a divorce is owns real estate. The only information you need to provide to your attorney is the address, a recent mortgage statement for each property and the deed, if available. For equitable distribution purposes, real estate generally must be appraised by a reputable appraiser in the area. If the real estate is to be sold, there is no need to get an appraisal. You and your spouse will just have to decide with whom to list the property and at what price.
It is easy to determine the value of bank accounts by looking at monthly statements. Since the date for valuation is the date of the divorce complaint, it is necessary to obtain copies of bank statements for the month that the divorce complaint was filed.

For stock that is traded publicly, you only need to know the number of shares that existed on the date of the complaint and the name of the stock. The price per share of stock can be obtained from daily newspapers.

Clients generally disregard pensions as an asset when they are inventorying assets. However, they have a value and often have a great value. In order to obtain the value, the pension information must be sent to an actuary to determine what the it is worth on the date of equitable distribution, i.e. the date of the divorce complaint. Since pensions are subject to equitable distribution, this value is absolutely necessary to obtain and you should retain the services of an expert to prepare this valuation.

Some pensions may be in the form of IRA accounts or 401(K) plans. If this is the case, an actuary is not necessary and a statement of the account on the date of the divorce complaint will be sufficient.
Closely held corporations, partnerships, and/or professional practices are very difficult to value. Many times, the party involved in a business has tight control over the books and records and does not always report their entire income. Whenever there is a closely held business involved in a divorce case, it is imperative to obtain the services of an accountant or business evaluator to determine the value of that business.

It is advisable to make an inventory of all furnishings and other personal property accumulated by either or both parties during the marriage. Generally it is not worth the money to obtain an appraisal of personal property. The suggested way of dealing with the division of personal property is by discussing it with your spouse or by having your attorney send a list to your spouse’s attorney of the property you wish to retain.

Occasionally, there are more marital debts than assets. If this is the case, it is advisable for you to make an inventory of all of the outstanding marital debts, and either close the accounts or stop incurring additional debt. If the marital estate is compromised of a lot of debt, it is wise to reach a compromise with your spouse than it is to spend what marital money there is for attorney involvement.

Technorati Tags: New Jersey : Divorce

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The equity in a marital residence (defined as the appraised value of the residence minus the existing mortgages and liabilities) is often the largest asset to distribute in a divorce.

Perhaps you need to access the equity in the residence to meet living expenses or to pay the cost of litigation, and you want to list the residence for sale right away. On the other hand, maybe you don’t agree that the house should be sold right away because of practical concerns. The way in which the residence is distributed, and when, is therefore a common source of contention.

The New Jersey Courts were previously barred from compelling the sale of a marital asset prior to the entry of a Final Judgment of Divorce, as in Grange v. Grange, 160 N.J. Super 153 (App. Div.1978).

However, pursuant to the New Jersey Supreme Court’s holding in Randazzo v. Randazzo, 184 N.J. 101 (2005), a Court may compel that the marital residence be listed for sale as long as it would serve best interests of the parties under the circumstances of each individual case.

In Randazzo a Husband and Wife owned multiple properties, but faced significant cash flow problems after losing a towing contract with the city of Clifton New Jersey. Id. at 104.

After the Wife filed a Complaint for Divorce, the Husband consented to the sale of a jointly held property in Florida. Thereafter, the Husband opposed the sale of the property and refused to sign the listing agreement. The Trial Court entered an Order stating that the Wife’s request to sell the Florida property was moot because the Husband already agreed to the sale. Id.

The Husband further resisted the sale of the property.

Ultimately, the New Jersey Supreme Court agreed to hear the Husband’s petition partially upon the issue of whether the trial court erred in ordering the sale of the property before the entry of the Final Judgment of Divorce.

In specifically overruling Grange v. Grange, supra, the Supreme Court held as follows:
The Family Part is a court of equity. We read the statutory requirement that directs equitable distribution at the time of the divorce judgment to be limited by the portion of N.J.S.A. 2A:34-23 that authorizes the court in its discretion to “ make such order as to the alimony or maintenance of the parties, and also as to the care, custody, education and maintenance of the children.” We conclude that, consistent with N.J.S.A. 2A:34-23 and Rule 5:3-5, the trial court may exercise its discretion to order the sale of marital assets and the utilization of the proceeds in a manner as “the case shall render fit, reasonable and just.” Id.at 113. (Emphasis added)

With those parameters in mind, it is always best to agree with your spouse about when and how a jointly held asset will be distributed to spare litigation costs and acrimony. However, if you believe that it is “fit, reasonable, and just” to sell the residence before the entry of the Final Judgment of Divorce over the objection of your spouse, you or your attorney may apply to the Court to compel the sale. The Court’s ultimate decision will be heavily influenced by the individual facts of your case.

Technorati Tags: New Jersey : Divorce : Marital Residence

 

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Technological advances have impacted virtually every aspect of modern life. Robert Ambrogi points to a recent story from CNN which shows how video conferencing capabilities now impact divorced parents and their children.

In New Jersey, the concept of virtual parenting time is not a new one. In fact, Justice Long cited the availability of video conferencing, email and similar technology in the New Jersey Supreme Court decision of Baures v. Lewis which she authored. That case made it easier for the residential custodian to relocate out of the state with the child.

While virtual visitation is an option for parents that may serve to ease the hardship caused by a physical separation from a child, it is clearly not the same as in-person parenting time. Divorced parents should explore this option as a means of maintaining their bond with their child. It is convenient and becoming more and more cost effective. As today's society becomes increasingly mobile it can be expected that technology will continue to have an impact on families of divorce.

Technorati Tags: New Jersey : Divorce : Visitation

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If you're paying child support in New Jersey, you might expect those payments to automatically terminate on your child's eighteenth birthday. Depending upon the circumstances, that expectation could be wrong.

Child support terminates when the Court finds that a child is emancipated. The Court's decision of whether or not to emancipate a child depends upon its analysis of the unique facts presented in each case. Since there is no specific age in New Jersey when a child will be deemed emancipated, there is no specific age that automatically terminates a parent's obligation to pay child support.

Parents often agree about when to emancipate a child well in advance of the child's eighteenth birthday. When the parents are formally divorced, the divorce judgment or settlement agreement usually address the issue in detail. However, some parents may disagree about how the wording of such documents apply to their child's circumstances. Worse still, many parents have never even discussed the appropriate time to emancipate their child and terminate child support.

If you and your child's other parent are unable to reach such an agreement about when your child should be emancipated, it may be necessary to file a motion with the Court. However, the process is complicated and can be overwhelming without legal representation and significant preparation. Typically, parents file competing applications that may or may not present enough evidence for the Court to make its final decision.

After reviewing each parent's motion and supporting documents, the Court may find it necessary to conduct a plenary hearing, or formal trial, upon the single issue of whether it is appropriate to emancipate the child at that time. If the Court conducts a plenary hearing, it is in the best interest of each parent to spend a great deal of time preparing their respective witnesses, evidence, and testimony.

Once the Court has all of the evidence it needs, it will critically evaluate all of the facts presented. Generally, the Court presumes that it is not appropriate to emancipate a child who is under the age of eighteen. However, it is sometimes possible to overcome that presumption. There is also a rebuttable presumption that a child who reaches the age of eighteen should be emancipated.

Once a parent who seeks to emancipate the child establishes that the child is in fact, eighteen years of age or older, the parent who opposes the emancipation has the burden to prove that it is still not appropriate to emancipate the child. If that parent fails to meet the burden, the child will be emancipated.

The Court will often emancipate a child if it finds that the child has moved beyond the sphere of influence and responsibility exercised by a parent, and if the child has obtained an independent status of his or her own. The analysis often focuses upon: the child's maturity level, the child's educational and career status, the child's educational and career goals, the child's reasonable needs to achieve those goals, the ability of the parents to continue to pay support, and any agreement previously reached between the parents about when to emancipate the child.

Due to the fact that the Court evaluates each emancipation application based upon the distinct facts of each case, it is always beneficial to retain the assistance of an attorney to help you through the process.

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In a recent appellate court decision, the court has provided further guidance to a litigant seeking to decrease or terminate their alimony obligation. In Storey v. Storey the Appellate Division held that if a supporting spouse is seeking to decrease a previously ordered support obligation so as to reflect the obligor's current - and decreased - earnings the obligor who has selected a new, less lucrative career must establish that the benefits he or she derives from the change substantially outweigh the disadvantages to the supported spouse. If the paying spouse cannot make such a showing, then the court is directed to imopute income to that spouse consistent with his or her prior earnings. This procedure is not to be followed, however, when the paying spouse is seeking the modifcation based upona diminished capacity to earn. If it can be shown that a parties' capacity to earn - as opposed to nothing more than a voluntary redcution of income - then the court is to impute earnings that are consistent with the obligor's capacity to earn in light of his or her background and experience. For either approach, the burden of proof lies with the party seeking the modification. In light of this decision, careful consideration must be given to the underlying reason for seeking the decrease so that the proper proofs can be presented and the proper level of income is imputed if appropriate.

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I/M/O Estate of Di Bella; Di Bella v. Di Bella

A Chancery Division judge has denied an estranged husband's application to serve as Administrator to his wife's estate. In this matter, the husband and wife were in the midst of a divorce when she died. The Chancery judge held that, if a plaintiff in a matrimonial matter dies intestate while the divorce complaint is pending, the estranged spouse is barred by, primarily, a conflict of interest, from becoming Administrator of the Estate. The application by the decedent's son from a previous marriage to serve as Administrator was granted.

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The Domestic Partnership Act is historically significant because the New Jersey Legislature recognized such relationships as beneficial to the state as a whole. The Legislative Findings and Declarations section of the Act states that domestic partnerships provide a private network of financial, emotional and physical support of the partners involved.

The Legislature found it important to provide domestic partners with the same protection that married citizens enjoy, such as: protection from employment, housing, and credit discrimination; the right for one partner to make medical or legal decisions for an incapacitated partner; and income or inheritance tax benefits.

The text of the act makes clear that the Legislature is committed to extending such rights to domestic partners which it finds "paramount in view of their essential relationship to any reasonable conception of basic human dignity and autonomy."

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