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Financial Services Regulatory and ComplianceLitigationReal EstateCorporateInfrastructure and Public Finance Practice Tax
Financial Services
Drawing upon the collective experience of our corporate, securities and tax attorneys, our financial services department has been widely recognized as providing skilled legal guidance to all types of clients in such diverse areas as Private Investment Funds, Venture Capital Investment, Investment Advisory Representation and Compliance Reviews. Our extensive experience in representing the financial community provides us significant economies of scale and the background to respond to most legal issues without time-consuming or costly research and analysis. We regularly monitor state and federal regulatory developments, which permits us to keep our clients well advised.
Private Investment Funds
The Financial Services Group provides legal assistance to both domestic and offshore private investment funds in the alternative investment arena (e.g. hedge funds, venture capital funds, commodity pools and group trusts), regarding the structure and formation of new funds, as well as the reorganization and restructuring of existing funds. We have structured and organized a wide variety of funds such as long/short funds, global macro funds, emerging market funds, risk arbitrage funds, convertible arbitrage funds, high yield bond funds, distressed debt funds, bank debt funds, country funds (e.g. Ukraine), sector specific funds (e.g. technology, Internet, health care, biotechnology), fund of funds and multi-manager funds. We skillfully draft confidential private placement memoranda, limited partnership agreements, operating agreements, subscription document booklets, blue sky filings and other necessary documents. We also advise and prepare agreements documenting the relationship among fund managers.
Venture Capital Investment
We have extensive experience representing venture capital funds, portfolio companies receiving venture capital and investors in venture capital transactions. We assist corporate and angel investors in conducting due diligence of portfolio companies, guiding them through both legal and business concerns. Transactions range from early stage seed rounds through late stage venture rounds involving the issuance of preferred stock, convertible debt instruments, warrants, and secured and unsecured bridge debt.
Investment Advisory Representation
We advise clients as to the initial registration and notice filing requirements under both federal and state laws, as well as ongoing compliance and other issues relating to the operation of their business, including advice concerning investment advisory agreements, record-keeping, engaging in soft dollar transactions, principal and agency transactions, sub-advisory arrangements, allocation practices, insider trading policies and employment matters. We often guide clients through contract negotiations with retail and institutional investors, custodians, brokerage firms and solicitors.
Regulatory and Compliance
We advise registered investment advisers, commodity pool operators and commodity trading agents with regard to whether they must register and their compliance obligations. We draft compliance manuals, create internal controls and perform mock audits. We also counsel clients with respect to informal inquiries, no-action letters, examinations, formal investigations and enforcement actions.
Litigation
Our litigation group consists of experienced securities and commercial litigators. We focus on representing clients prosecuting or defending claims under the securities laws as well as NASD, NYSE and other self-regulatory organization arbitrations and proceedings. We also represent clients involved in partnership or limited liability disputes and dissolution proceedings, real property litigation, employment disputes, intellectual property disputes and collection proceedings involving secured instruments. Our litigators have successfully tried numerous cases to verdict and regularly appear in federal and state court.
Real Estate
We regularly represent developers throughout the metropolitan New York area, advising on projects involving, public and private financing, partnership structuring, construction contracts, hotel management, leasing, sales, exchanges and other dispositions. Our attorneys are active in a variety of transactions involving construction of office, industrial, retail, hotel and residential projects, bringing special expertise in mixed-use developments.
Our lawyers also represent lenders and borrowers in all areas of real-estate-secured financings and loans.
Corporate
We represent a wide variety of corporations and financial institutions in corporate finance transactions as well as mergers and acquisitions; private investment vehicles (hedge funds, venture capital funds, buyout firms in fund formation and private equity investments), start-ups and their financing sources, and domestic and international corporations in strategic alliances. The Firm also acts as outside counsel to numerous public and private corporations for their general corporate needs.
The firm's corporate, finance and securities lawyers are experienced in all aspects of federal and state securities regulation. We regularly act as counsel to issuers and investors in private placements of equity and debt securities. We also advise issuers preparing for public offerings of securities, and provide ongoing securities law advice to our corporate clients.
Mergers & Acquisitions
We regularly act as special counsel to corporations, controlling stockholders and employee groups in mergers, stock and asset acquisitions, joint ventures, shareholder agreements and leveraged buyout transactions.
Private Equity and Venture Capital Investing
With the Firm's experience in venture capital and buyout transactions, our attorneys play a strategic role in connecting cutting-edge start-ups and private and public companies with financing sources and strategic corporate partners. The Firm handles equity investments in private companies at all stages of development, from seed capital through initial public offering, and in a variety of industries including software, consumer products, information processing, telecommunications, healthcare, Internet and new media. We regularly advise on the structure and terms of securities offerings and negotiate the related agreements. We often become strategic advisors to these companies.
Franchises and Retailers
The Firm has been representing franchisees, franchisers, retail companies and their owners for over 50 years. We regularly advise clients on structuring and negotiating the purchases and sales of retail businesses. We routinely represent franchisees in structuring and negotiating franchise transactions.
Infrastructure and Public Finance Practice
Sadis & Goldberg LLP's Infrastructure and Public Finance Practice, with over thirty years of experience, has been involved in virtually every type of infrastructure project financed with municipal bonds, taxable and tax exempt. Our attorneys are experienced as both letter of credit bank counsel and underwriters' counsel.
Our attorneys' project finance, energy and real estate construction practices are similarly distinguished in their breadth and experience. The Firm's attorneys have led many iconic financings such as The Staples Center in Los Angeles, California, The Pepsi Center in Denver, Colorado, and The Forum at Caesars' Palace in Las Vegas, Nevada and The Oakland Raiders Stadium in Oakland, California.
Tax
Our tax and ERISA (Retirement Plan) lawyers advise on a wide range of securities offerings and other transactional work as well as providing personal tax planning for individuals and families. Our securities and transactional practice encompasses tax-efficient structuring of mergers and acquisitions and advice in the formation and tax-efficient operation of investment vehicles for domestic and offshore entities. Our mergers and acquisitions practice encompasses both corporate transactions as well as ones involving closely-held partnerships. Cross-border transactions are an important component of our mergers and acquisitions practice.
We advise private investment vehicles such as hedge funds, private equity funds, venture capital funds, and their managers and investors. Many of these vehicles invest in highly complex trading strategies and in cutting-edge financial instruments, all of which requires the up-to-the-minute tax expertise that we pride ourselves on providing. There is a significant international component to this tax advice, as our fund practice has become increasingly global in scope.
We have established many fund vehicles in offshore jurisdictions to achieve tax-efficient investing by both U.S. tax-exempt organizations, including IRA's and foundations; and by foreign investors. These structures are designed so as to accomplish the optimal lawful tax results for the participants, including minimization of United States taxation of foreign investors and elimination of the Unrelated Business Income Tax (UBIT) for U.S. tax-exempt investors. In advising on offshore vehicles, we work closely with leading law firms established in the principal offshore jurisdictions, so as to achieve the optimal tax results in all of the tax jurisdictions involved.
We advise many fund managers on how to structure their own investment and their rights to future profits or fees, in both onshore and onshore funds to reduce taxation to the lowest possible levels. In particular, we have drafted deferred compensation plans for many managers of offshore funds to achieve deferral of U.S. taxation of their fees until dates well into the future (known as Section 409A plans in reference to the governing provision of the tax law). In like manner, we also advise investors in fund show best to structure their participation, such as the use of life insurance and trusts, to reduce or eliminate federal income taxes and state and local income taxes.
State and local income taxation of funds, their managers and investors has become increasingly important as many states find themselves with big budget deficits. While New York State and City and California, in particular are long-time focal points in our fund tax practice, many other states can be heard clamoring for fund tax dollars. We work hard with our clients to minimize not only the tax dollars going to the states, but also to reduce the burdens on administrators and other service providers that can come with poor state tax planning.
ERISA
We advise numerous businesses and pension plan trustees how to create and operate pension plans of different types. These plans are both qualified (the sponsor generally receives a deduction when contributions to the plan are made but the employees are not taxed, if at all, until distributions to the plan are made to them) and nonqualified (the sponsor receives no deduction until the employee reports the income from the plan). We establish stock ownership plans and other equity incentive plans for companies in a variety of industries, and advise the participants in those plans on the decisions they have to make.
Employee Stock Ownership Plans (Employee Stock Ownership Plans)
Since 1974, Congress has provided a variety of tax incentives for owners of corporations to create Employee Stock Ownership Plans (“ESOPs”). A properly implemented ESOP benefits both the company and the employees, and helps to provide a stable working environment. Few tax incentives found in the Internal Revenue Code have been as stable and long-lived as ESOPs, and continue to enjoy support from both Republicans and Democrats.
ESOPs are popular in both the public and privately held company spheres. More than 10% of the New York Stock Exchange companies have ESOPs, and many of the best-run companies and their advisors have found ESOPs to be a valuable tool for success. ESOPs are even more important to the owners of closely held businesses, where highly advantageous, and entirely appropriate results, have been seen. Like other financial tools, ESOPs must be implemented appropriately, in suitable situations, or else run the risk of confusion, and even, in some cases, a failure of the plan to become effective.
We are known nationally for our ESOP expertise. Our ESOP practice specializes in closely held corporations that want to sell shares to employees, benefiting both the employees and owners, who receive long-term capital gain treatment in the sale of their shares.
In advising how to structure and operate an ESOP, we work closely with banks providing trustee services to the plan and to the owners of closely-held businesses and their lawyers and advisers to achieve a result that complies with all of the often highly-technical aspects of ESOPs and that makes sense from a business standpoint for all concerned. We are highly knowledgeable in the due diligence process that is the prerequisite to every successful ESOP transaction.
Please read the description below of what makes ESOPs a special type of benefit plan.
What is an ESOP – An ESOP is a type of pension plan, which is designed to invest primarily in the stock of the employer corporation. It is the only type of pension plan, which can borrow money. Congress has created numerous tax incentives for corporations to create ESOPs to promote the formation of ESOPs. These tax incentives include:
- The ability of the selling shareholder not to recognize gain on the sale of stock to the ESOP, assuming certain requirements is met.
- The ability of the corporation to deduct contributions made to the ESOP to pay both interest and principal on loans made to an ESOP.
- The ability of a corporation to deduct dividends paid on stock held by an ESOP.
- For ESOPs holding stock of an S corporation not to be subject to tax on their share of corporate earnings.
These tax incentives, and others when used in conjunction with various recapitalizations and financing structures can create a better alternative for owners of businesses, on an after-tax basis, than a sale to a third party.
Brief Benefits of ESOPs:
Companies completely owned by an ESOP are not subject to federal and state income taxes, in most states, if the Company has an S corporation election.
Shareholders who sell privately held stock to an ESOP can defer the income on the sale if the proceeds are reinvested in U.S. stocks and bonds, if the ESOP owns at least 30% of the Company after the sale, under Section 1042 of the tax code. ESOPs are the only type of pension plan that can borrow money from the sponsor Corporation, and contributions to ESOPs for repayment of the loans are typically structured to be tax deductible.
Dividends paid on stock held by ESOPs are tax deductible under Section 404(k).
ESOPs allow owners of privately held businesses the ability to sell some of their shares of the company and financially diversify into publicly traded stocks and bonds. Some of the bond investments for ESOP “rollover” sales are designed and structured so that the owner can borrow against the bonds and use the money for other things, without being subject to current income tax proceeds on the borrowing.
Legal Concerns about ESOPs:
ESOP Plans are qualified plans governed by both ERISA and the tax code. We notice in practice two mistakes that are frequently made by those who implement ESOPs and enter into transactions with ESOPs – either the professional advisors selected to handle the matters are not competent or experienced sufficiently in this area to avoid mistakes, or they are much too expensive for the size of the client and the transaction. We frequently are brought in to represent institutional trustees when ESOP deals that others have implemented are not working out, for one reason or another. It is critically important that the transaction occur in a way compliant with ERISA and Tax law.
Links:
The National Center for Employee Ownership – www.nceo.org
The ESOP Association – www.esopassociation.org
Trusts and Estates
The Firms has a well-developed trust and estates practice, serving clients' needs ranging from simple wills, trusts, health care proxies and the like to complex estate planning programs for wealthy international executives and entrepreneurs. Money managers and business owners who have the financial capability to select counsel in the largest law firms will often retain or recommend us due to the specialized techniques and individualized attention we provide in implementing strategies to reduce gift and estate taxation. We have identified and implemented trusts and other transactions that have significantly reduced future estate taxes, which were overlooked by other law firms. We have a broad range of experience in the areas of estate planning, trust and estate administration, buy-sell agreements utilized in closely-held companies funded with life insurance, charitable giving, advising institutional fiduciaries, creating and advising exempt organizations, and trusts and estates litigation.
Estate planning can be complex and technical in areas such as generation skipping taxes on transfers from a senior generation to a younger generation skipping the generation in-between, personal residence trusts, grantor retained income trusts, charitable lead trusts, and life insurance trusts. We strive to identify and discuss with each client the risks inherent in their current planning and ways to reduce those risks by employing more efficient strategies.
Common Estate Planning Techniques and Documents
Tax Controversies
Our tax lawyers have extensive experience in representing taxpayers involved in tax disputes with federal, state and local tax authorities. In addition to representing clients involved in disputes at the tax agent level, we represent clients in tax cases, including trials before the United States Tax Court. Our extensive trial background combined with our attorneys' in-depth knowledge of tax law makes our tax litigation practice particularly attractive to clients with complex tax disputes, especially those involving the financial services industry.
