What is Transactional Law?
Transactional law is a broad area of law that generally governs business dealings between individuals, businesses and governments. Transactional law includes contract law. Transactional law has existed since at least Ancient Roman times under the doctrines of contractus litteris or stipulatio. Some Roman contract principals are still used to this very day. Contract law in the United States largely developed from English common law principals which were transferred to the colonies and have been modified over time. Many contracts are also regulated by state or federal statutes. Written contracts are generally favored, but Nevada does recognize oral contracts for some matters. Transactions can range from a simple contract for the purchase of goods and services, to a complicated merger of publicly traded corporations across international borders. Most business dealings require some level of planning and the preparation of formal transactional documents between the parties. There are literally thousands of business transactions occurring in Nevada every single day. Some common types of transactions include a simple contract for services, such as a contractor or painter. A more complex transaction would be a purchase agreement for a business which requires more extensive work to negotiate and prepare.
What is a Secured Transaction?
Secured transactions are transactions that involve a loan or credit in which the lender requires some form of security interest in collateral by the borrower. If the borrower fails to repay the debt, they will be in breach of the agreement and the lender may be able to foreclose on or repossess the collateral. A common example of a secured transaction that most people are familiar with is a car loan; if you fail to pay your car payments, the lender will seek to repossess the car.
Another common type of secured transaction is a promissory note entered into between borrowers and lenders. Promissory notes are often used by individuals and businesses as a simple way to acquire the money they need to run their business activities. If you are loaning money to a person or business, it is a good idea to prepare proper documentation to memorialize the agreement between the parties in case the borrower fails to pay. Having a proper security interest in something of value is a good way to lessen the potential losses to the lender. Secured transactions are subject to heavy regulations so they must be prepared very carefully if they are going to be effective.
Transactions Involving the Sale of a Business or Securities?
Parties who are buying or selling a business need to make sure that they have prepared a proper transactional document, typically called a purchase agreement. Most negotiations for the purchase of all or part of a business start with a letter of intent (LOI), which itself needs to be prepared very carefully to protect both parties before further negotiations take place. The second step is usually the preparation of the formal purchase agreement. Preparing a proper purchase agreement is critical to the success of a business transaction. The party buying the business or asset may wish to form a new entity to conduct the transaction. The seller’s assets, such as real estate, need to be accounted for; governing documents need to be reviewed; due diligence needs to be performed; escrow accounts need to be set up; the company’s contracts, insurance policies, employment agreements and benefit plans need to be dealt with; leases for real property need to be transferred or terminated, etc. All of these issues, and many more, need to be fully addressed in your purchase agreement or else a very simple transaction can turn into costly litigation.
Depending on the type of business, there can be significant regulations in place that need to be accounted for in your transactional documents. Parties seeking to raise investment capital in exchange for equity ownership in a business need to consider state and federal securities laws. The sale of securities in Nevada is strictly regulated; violations of securities law can have very severe civil and criminal consequences. Chances are, if an investment opportunity seems too good to be true, it probably is.
Buying or selling a regulated business, such as a gaming establishment or a marijuana business brings a lot of complications that need to be addressed in negotiations and transactions. If the business is heavily regulated by the state or federal government, the purchaser may need to seek approval from the regulatory bodies before a transaction can be closed. This often results in lengthy delays that need to be accounted for in the parties’ purchase agreement or other transactional documents.
What do Transactional Lawyers do?
The primary purpose of a transactional attorney is to provide their clients with legal advice and services in the negotiation and preparation of their transactional documents. In addition to preparing transactional documents, transactional attorneys provide guidance or other services to their clients, such as handling escrow, transferring funds or licenses during the course of their client’s transaction. The goal of transactional attorneys is to help their clients avoid negative or unforeseen outcomes in their business transactions. In the scope of their practice, transactional attorneys will often touch on a wide area of laws as many different factors can affect a transaction, such as corporate law, wills and trusts, contract principles, local licensing, land use, real estate, and litigation. Ultimately, the goal should be for their clients to avoid problems in the future by taking contingencies into consideration before a transaction is signed. Once a contract is executed, it is very difficult to modify it if things go wrong.
How Can the Attorneys at Connor & Connor PLLC Help?
Our attorneys firmly believe that it is better to spend a little time and money in the beginning of a transaction than to spend lot of money in court if things go wrong down the road. If you need a contract prepared for you or your business, or if you are in the process of selling all or part of a business, contact one of the attorneys at Connor & Connor PLLC to discuss how we can assist.