Brown, Moskowitz & Kallen, NJ & NY Attorney News

Brown Moskowitz & Kallen Partners Stuart Brown and Norman Kallen are the latest guests on the Business Unchained podcast hosted by Bobby Mascia.

Episode Highlights:

What does it take to turn a business deal into a true success story? In the world of mergers and acquisitions (M&A), the stakes are high, and the challenges are many—especially for family-owned businesses and middle-market companies.

In this episode of Business Unchained, host Bobby Mascia sits down with Stuart Brown and Norman Kallen, co-founders of Brown Moskowitz & Kallen, a law firm specializing in mergers and acquisitions (M&A). With nearly 26 years of experience working together, their firm has become a trusted name in connecting buyers and sellers of middle-market businesses valued between $50 million and $100 million.

Here’s a link to the episode on YouTube: https://lnkd.in/eJgkYp8P

Brown Moskowitz & Kallen, P.C. recently represented SAFE-COM Wireless LLC, a New Jersey-based designer and manufacturer of mission-critical distributed antenna and sensor systems, in its sale to RATH™ Communications, a subsidiary of AVIRE, a global leader in emergency communication and safety solutions, with locations in Europe, North America, and Australia.

Based in Holmdel, New Jersey, SAFE-COM Wireless designs and manufactures Emergency Responder Communication Enhancement Systems (ERCES). Their innovative solutions, such as bi-directional amplifiers and fiber optic distributed antenna systems, play a critical role in keeping first responders connected during emergencies. SAFE-COM Wireless attenuators enable local police and other first responders to communicate with a property in an active crisis via the most integrated in-building radio communications and sensor systems ever introduced, elevating response safety. As part of RATH™ Communications, the strategic acquisition of SAFE-COM Wireless enhances AVIRE’s comprehensive range of emergency communication solutions and strengthens its service to customers across North America.

Stuart M. Brown, Partner and Co-Chair of the Commercial Transactions practice, and Justin Escher Alpert, Senior Counsel, represented SAFE-COM Wireless in the transaction.

Brown Moskowitz & Kallen has brought business acumen to legal representation for more than 25 years, leading complex mergers and acquisitions for privately held clients with local, national, and international business interests.

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By Linda R. Brower, Esq., Senior Counsel, Commercial Transactions

What Happened

In the same week, the Fifth Circuit Court of Appeals both lifted, and then reinstated, the temporary injunction halting enforcement of The Corporate Transparency Act (Act) and its reporting requirements.

On December 23, 2024, a three-judge panel (the “motion panel”) of the Fifth Circuit Court of Appeals granted the government’s emergency motion to reverse a lower District Court’s decision to impose a nationwide injunction against enforcement of the Act. The motion panel held that the government had met its burden to demonstrate the likelihood of success on the merits that the Act is constitutional. As a result of this decision, the government immediately extended the reporting deadlines under the Act for a brief period, adjusting most of them to January 13, 2025.

At the same time, the plaintiffs in the underlying case petitioned the same appellate court for an emergency hearing en banc – a hearing by a panel consisting of a greater number of judges (a “merits panel”). Plaintiffs asked the merits panel to reverse the decision lifting the injunction made by the motion panel.

On December 26, 2024, the merits panel did just that. It reversed the decision of the motion panel, the effect of which was to reimpose the nationwide “pause” in enforcing the Act and to suspend the new reporting deadlines for all reporting entities under the Act. The merits panel said it was reimposing the injunction to “preserve the constitutional status quo” so that the Fifth Circuit Court would have sufficient time to consider the parties’ “weighty substantive arguments.” The merits panel decided that forcing plaintiffs to comply with the Act now would unfairly prejudice their claims, even if they were to ultimately lose on the merits of their claims. Thus, for now, the government is enjoined from enforcing the Act and there are no reporting deadlines in place. Voluntary reporting under the Act continues to be permitted and has never been halted at any time during consideration of the issues by the prior courts in the case.

The Fifth Circuit has set an expedited briefing and hearing schedule in the case for early in 2025. Oral argument is now scheduled for March 25, 2025, after which the Fifth Circuit appellate court will issue its final decision on the constitutionality of the Act.

What’s Next

Currently, there is no obligation for reporting companies to report under the Act. This applies to all reporting under the Act, not just the filing of initial reports. Therefore, regardless of when a reporting company was formed, no initial, updated or corrected reports have to be filed now.

Reporting companies should continue to monitor the News section of the BMK website for information and updates about the status of the underlying case in the Fifth Circuit Court of Appeals as well as for updates about the Act and its reporting requirements. We will continue to monitor developments under the Act and report on them as they occur.

This communication is not a full analysis of the matters presented and should not be relied upon as legal advice and could be considered attorney advertising.

By Linda R. Brower, Esq., Senior Counsel, Commercial Transactions

What Happened

On December 23, 2024, the Fifth Circuit Court of Appeals lifted the preliminary injunction imposed by a U.S. District Court in Texas earlier in the month that had stopped all required reporting under The Corporate Transparency Act (the Act).

On December 3, 2024, a U.S. District Court in Texas, in a first-of-its-kind ruling under the Act, issued a nationwide preliminary injunction “pausing” all mandatory reporting by reporting companies under the Act, after finding that plaintiffs in the case had demonstrated a likelihood that the Act was unconstitutional.

The Department of Justice (DOJ) took an emergency appeal to the Fifth Circuit Court, requesting an emergency stay of the lower court’s injunction order pending a final decision of the merits of the case which could take months or longer to resolve. After an expedited briefing schedule, the Fifth Circuit Court lifted the injunction against enforcement of the Act on December 23, 2024, finding that the DOJ had met its burden to demonstrate the likelihood of success on the merits that the Act is constitutional.

What’s Next

Immediately following the decision by the Fifth Circuit Court of Appeals, FinCEN issued a Press Release and a revised schedule for entities subject to the Act to file their required Beneficial Ownership Information Reports (BOI Report).

FinCEN issued the following information and filing extensions for initial BOI Reports:

• For reporting companies existing prior to January 1, 2024, the filing deadline is now January 13, 2025, instead of January 1, 2025;
• Reporting companies created or registered in the United States on or after September 4, 2024, that had an initial filing deadline between December 3, 2024 and December 23, 2024, now have until January 13, 2025, to file their initial BOI Reports;
• Reporting companies created or registered in the United States on or after December 3, 2024, and on or before December 23, 2024, have an additional 21 days from their original filing deadline to file their initial BOI Reports;
• Reporting companies that qualify for disaster relief may have extended deadlines that fall after January 13, 2025, and their initial filing deadline is now extended to whichever deadline is later;
• Reporting companies that are created or registered in the United States on or after January 1, 2025, have 30 days to file their initial BOI Reports (after receiving actual or public notice of effective creation or registration).

The Press Release did not address reporting companies that are created or registered in the United States on or after December 24, 2024 through December 31, 2024. Accordingly, we presume that these companies should report within 90 days of the notice of effective formation/registration in accordance with the Act’s original reporting requirements.

No extension was announced for entities formed on or after January 1, 2025. These reporting companies will have 30 days from notice of effective formation/registration to file initial BOI Reports in accordance with the Act’s original reporting requirements.

For further information about the Act and its reporting requirements, please refer to the News and Resources sections of our website. We will continue to monitor developments under the Act and report on them as they occur.

This communication is not a full analysis of the matters presented and should not be relied upon as legal advice and could be considered attorney advertising.

By Linda R. Brower, Esq., Senior Counsel, Commercial Transactions

The Background

The BMK Corporate Group has previously written in this space about The Corporate Transparency Act (the Act) as a topic of interest to clients and friends of the firm. We write now to update you regarding a new development under the Act and its reporting requirements — specifically, the Beneficial Ownership Information Reporting Rule (BOI Reporting Rule.

Recall that the Act was intended to expose, and thus deter, shell companies engaged in illegal activities, including terrorist financing, money laundering and tax fraud. The Act requires that companies subject to the Act and their “beneficial owners” must report sensitive information, including names, addresses, birthdays and drivers’ license or passport identification numbers.

What Happened

On December 3, 2024, in a first-of-its kind ruling under the Act, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction “pausing” the reporting requirements for all reporting companies (not just plaintiffs in the case).  The result of the ruling is to prohibit the federal government from continuing to enforce the Act and its BOI Reporting Rule until further court action stays, overturns or modifies the injunction.

The Texas federal district court determined that the plaintiffs in the case had demonstrated the likelihood that they would prevail on the merits of their claims that the Act was unconstitutional and exceeded Congress’s power to enact. The U.S. Department of Justice (DOJ) already filed a notice of appeal to the U.S. Court of Appeals for the Fifth Circuit on December 5, 2024.  The  DOJ’s first move will likely be to seek a stay of the lower court’s preliminary injunction (and let the BOI Reports continue to be filed) while the DOJ appeals to the Fifth Circuit on the merits of the case on an expedited basis (i.e., to allow for an expedited hearing on the parties’ opposing contentions).

What This Means For Reporting Companies

In short, at least for now, companies that are subject to the Act and the BOI Reporting Rule are not required to submit beneficial ownership reports to FinCEN. For those companies subject to the Act that have not yet filed an Initial Report, it would be best to continue to be prepared to file the BOI Report. It is still possible that pre-2024 reporting companies will be required to file by the original deadline of January 1, 2025.  The FinCEN reporting portal is still open and accepting BOI Reports for filing.

For pre-2024 reporting companies that have already filed initial BOI Reports, monitor the media for reports that the information submitted in initial BOI Reports is going to change. It is certainly in line with FinCEN’s responsibility that it will be issuing further guidance to reporting companies in the extremely near future on this subject.

This communication is not a full analysis of the matters presented and should not be relied upon as legal advice and could be considered attorney advertising.

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Friends and family members routinely loan each other money — at times considerable sums of money — for working capital or for other needs on the basis that the trusted borrower will repay the loan as soon as he or she is able to do so. A recent New Jersey Appellate Division decision has affirmed that these informal loans are enforceable in New Jersey.

Brown Moskowitz & Kallen’s Kenneth L. Moskowitz and Michele-Lee Shapiro recently represented a lender who made a pay-when-able loan in a very substantial amount to a close friend who was in desperate need of funds to keep his diverse business interests afloat. In August 2023, on plaintiff-lender’s action to enforce repayment of the loan, a Bergen County Superior Court entered Final Judgment in favor of the plaintiff. The trial court held that pay-when-able loans are legally enforceable in New Jersey and that the plaintiff’s cause of action accrued when the defendant admitted to plaintiff his ability to repay the loan. The trial court’s 63-page opinion was replete with findings that the defendant’s testimony was not credible, and the court rejected all of defendants’ arguments seeking to avoid repayment of the loan.

On November 19, 2024, the New Jersey Appellate Division affirmed the Superior Court’s decision in a unanimous opinion, holding that pay-when-able loans are “valid and enforceable in New Jersey.” The appellate court affirmed the trial court’s enforcement of plaintiff’s pay-when-able loan.

Should you have any questions concerning pay-when-able loans or other business disputes, we would be happy to speak with you at any time.

Kenneth L. Moskowitz is the Chair of the Litigation Department at BMK, and Michele-Lee Shapiro is Senior Counsel in the firm’s litigation group. Ken and Michele-Lee represent clients in a broad range of business disputes in state and federal courts, as well as in arbitration.

Benjamin L. Roth has joined Brown Moskowitz & Kallen, P.C. as an associate attorney. At BMK, Mr. Roth is engaged in a diverse practice offering counsel related to business formation, organization and capitalization, as well as with respect to certain litigation matters for clients of varying sizes across many industries.

In the BMK corporate business practice group, he is involved in client matters that encompass every stage of the business life cycle. This includes structuring partnerships and joint ventures, assisting in the resolution of shareholder issues, and the preparation of documentation related to mergers and acquisitions. He is also active in BMK’s litigation and dispute resolution practice, working on an array of matters.

Before joining BMK, Benjamin Roth held Associate Attorney posts with two other New Jersey law firms, earning experience in insurance fraud, intellectual property infringement, and commercial litigation. He earned a Bachelor of Arts cum laude from Binghamton University, with concentrations in English and Philosophy, Politics, & Law before graduating from Fordham University School of Law. He is admitted to practice in the State of New Jersey.

Brown Moskowitz & Kallen, P.C. recently served as lead counsel to a prominent provider of musical instruments to primary and secondary school students (the “Company”) in an all-cash sale to a private equity-backed strategic acquirer.  The incumbent management will be providing transition services to the acquirer.

The transaction, which equips the Company with expanded operating capital to further grow both its regional and national market penetration and cross-pollinate its sales opportunities with the acquirer’s customer base, was completed on an accelerated schedule to capitalize on certain strategic dates. The transaction began in earnest in early July 2024 and closed on August 13, 2024.

The BMK team was comprised of Stuart Brown and Norman Kallen, Partners and Co-Chairs of the BMK Commercial Transactions practice group, as well as Karen Hirschfield and Linda Brower.

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BMK Represents Strong Man Safety Products in Strategic Sale to Affiliate of PearlWeave Netting Corporation

Brown Moskowitz & Kallen, P.C. recently represented New Jersey-based Strong Man Safety Products, a provider of debris netting, weather enclosures, fall protection and containment products, in a strategic sale to Strongman, LLC, a newly formed affiliate of New York-based PearlWeave Safety Netting.

“Strong Man Safety Products is a family-owned business that seized the opportunity to sell the company to another respected entity in the safety netting industry,” said Stuart Brown, Partner and Co-Chair of Commercial Transactions at BMK.

Elaine Kinder, Owner and CEO of Strongman commented, “The attorneys at BMK were both knowledgeable and sensitive to my concerns. They provided the expert advice necessary to complete the transaction.”

In addition to Stuart Brown, the BMK team included Keith Marlowe, Partner, real estate; Karen Hirshfield, corporate counsel; and Wanda Chin Monahan, environmental counsel.

BMK represents sellers across diverse industries in middle market M&A transactions. The BMK Commercial Transactions group frequently serves as lead counsel in M&A deals, assembling all legal subject matter experts to execute transactions that optimize seller interests and align with market growth, succession, and legacy aspirations.

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By Stuart M. Brown, Partner and Co-Chair, Commercial Transactions

So you’re thinking about selling your business. You decided that it is “time.” You are emotionally ready. You are financially ready. Great!

Working with sellers like you, here are four (yes, just four) points to consider before you go any further:

• Create a deal team… you will need an experienced accountant, attorney, intermediary and financial planner. Experience is key, but do NOT settle for experience. Make sure that you have a good gut feeling for the person/firm. A good gut feeling includes being able to communicate easily and feel like you are on the same page as your advisors.
• You will sell on your company’s past performance; however, the purchaser will buy based on what it views as future opportunities. So be realistic in your goal for a sale price. Be as introspective as possible (aka, don’t believe your own sales pitch because buyers will poke holes).
• No one can guarantee you anything in addition to what you receive at the closing table. There are multiple ways to characterize sale price:
  • Cash at closing (which is most preferrable)
  • Deferred payments (you, as the seller, take back “paper,” a promissory note which is a contract from the buyer to pay you at a later date)
  • Contingent payments (these payments are predicated on an event occurring such as gross revenue or EBITDA targets post-closing, a concept referred to as an “earnout”)
  • Rollover equity (this means that you, as the seller “partner” with the buyer because you either retain a certain amount of your company’s equity or you get equity in the buyer in lieu of cash).

Be careful when it comes to structuring the payment of the sale price. The question that I often ask clients is would you rather sell your business to me if I offer you $50 million or to Sally if she offers you $7 million? The answer is obvious, right? Clearly, my offer is better. Oh, did I fail to mention that Sally is paying you $7 million at closing but I’m paying you $1 million at closing and $1 million a year for the next 49 years? Still think my offer is better?

• If your transaction was a Broadway show, you should be in the starring role as the “reluctant seller.” Do NOT be anxious, meaning you should not purchase that red Ferrari until the deal closes. You have maximum leverage early in the negotiation process. Use your leverage, but don’t be a pig… remember, ultimately, pigs get slaughtered.

Each one of these points is worthy of a much longer discussion. Hopefully, you will choose a deal team that can properly advise you and manage your expectations. By the way, deals take time — don’t expect to close in 60 days. It rarely happens. So, enjoy the journey because the destination is within reach of the patient and thoughtful seller. Good luck!

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