Brown, Moskowitz & Kallen, NJ & NY Attorney News

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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FOR IMMEDIATE RELEASE

Brown Moskowitz & Kallen Represents A&R Bulk-Pak in Sale to NOVA Infrastructure

South Carolina-Based Packaging and Logistics Company for Petrochemical Industry Elevates Service to Global Chemical Industry through Acquisition by NOVA  

Chatham, New Jersey December 2023 — Brown Moskowitz & Kallen, P.C. (BMK) recently represented Moncks Corner, South Carolina-based A&R Bulk-Pak (A&R), a leading provider of contract packaging, transloading, warehousing and other vital supply chain services to the petrochemicals industry in its acquisition by NOVA Infrastructure, a middle market infrastructure investment firm that invests in the environmental services, transportation, energy/energy transition and communications sectors in North America.

Over the past decade, the Port of Charleston has evolved into one of the most active export hubs for the North American chemicals industry, with A&R among the leading suppliers of essential supply chain solutions. A&R operates a 240,000-square-foot warehouse at the port with two high-speed automatic packaging lines, rail access to the CSX main line and onsite storage for more than 120 railcars. The facility engages in transloading and packaging of polyethylene pellets for leading chemical producers and trading houses. The sale to NOVA enables A&R to accelerate its growth in serving global chemical providers.

As part of the acquisition by NOVA, A&R has entered into a strategic partnership agreement with Harbor Logistics, a portfolio company within NOVA. Harbor provides transportation, logistics and warehousing services in Charleston. Harbor, A&R and NOVA are now long-term partners operating in concert to deliver comprehensive supply chain solutions throughout North America.

“The acquisition by NOVA and aligned agreement with Harbor Logistics offers significant strategic expansion opportunities to A&R,” said Norman D. Kallen, Partner and Co-Chair of the Brown Moskowitz & Kallen Commercial Transactions Group, who served as lead M&A counsel for A&R. “This transaction involved structuring several creative solutions that enable NOVA to leverage A&R’s dominant position at the Port of Charleston while providing a pathway for A&R to penetrate the global chemical industry marketplace and offer elevated supply chain solutions with NOVA-owned Harbor Logistics.”

Mr. Kallen was joined in the transaction by Justin Escher-Alpert, Senior Counsel of Brown Moskowitz & Kallen. A&R was advised by Michael Givner of IMG Business Advisors. Additional legal counsel was provided to A&R by Joshua Laff of The Law Office of Joshua F. Laff.

NOVA Infrastructure & Harbor Logistics were advised by Scudder Law Firm, P.C., L.L.O. and Jones Day.

About Brown Moskowitz and Kallen, P.C. 

Brown Moskowitz & Kallen, P.C. is a New Jersey-based law firm serving privately held businesses locally, nationally, and internationally. BMK provides comprehensive counsel at every stage of the business life cycle with practice areas in commercial transactions, finance, litigation/dispute resolution, real estate, land use, technology, tax, trusts and estates. For more information, visit https://bmk-law.com/

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BMK’s Stuart Brown, Partner and Co-Chair of the Commercial Transactions practice, is once again featured in Eisner Amper’s Solutions In Sight Middle Market M&A Video Series. This time, EisnerAmper tax partner Jordan Amin, Scott Daspin, Director of Investment Banking at Triad Securities, and Stuart discussed the emotional aspects of selling a business. The trio addresses the emotions sellers commonly experience amidst a business sale and the ripple effect the process has on personal and professional relationships. Topics covered in the video include:

• Determining when one is emotionally ready to sell a business
• Why an M&A transaction is a team sport and why the seller relies on the team to navigate both the numbers and the emotional touchstones inherent in every transaction
• Protecting one’s mindset throughout the process
• Managing family expectations during and after a sale
• Feeling confident in the buyer to steward the business post-sale
• Preparing for life after the closing and avoiding “seller’s remorse”

Bottom line: M&A transactions are not just about the numbers. Emotions inform whether a sale is deemed successful just as much as the financial outcome. To view Stuart’s discussion with Jordan and Scott, please visit https://www.eisneramper.com/insights/solutions-insight/solution-sessions-videos/middle-market-merger-acquisition-video-1223/

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Brown Moskowitz & Kallen Co-Founder, Partner and Chair of the Litigation and Dispute Resolution practice, Kenneth L. Moskowitz, has been recognized as a 2024 SuperLawyer® by Thomson Reuters. The SuperLawyers® designation is a highly coveted peer recognition of professional achievement by the legal community.

An attorney can only obtain a SuperLawyers® designation via nomination by their peers in a research-driven, multi-phase patented process. The annually published list comprises a comprehensive directory of the top five percent of attorneys in New Jersey.

You can read Ken’s SuperLawyers® profile here: https://profiles.superlawyers.com/new-jersey/chatham/lawyer/kenneth-l-moskowitz/4323a70a-1608-4f13-b417-365e5118c975.html