Saturday, August 27, 2011

Corporate Due Diligence and Asset Searches in Litigation

Corporate Structure
Unlike typical businesses or limited liability companies (LLC’s), corporations are structured differently and created under the laws of a state to establish it as a separate entity of its Board of Directors. Various forms of corporations exist and the actions of the corporate officers are governed by the bylaws of the entity.

Though not universal throughout the United States, one aspect of a corporation is in the event that a corporation fails, shareholders, may lose their investments, members may lose their positions and employees may lose their jobs but will not be held liable for remaining debts owed to the corporation’s creditors.

Corporations are generally accepted by law to have responsibilities similar to that of an individual and can exercise rights against other individuals and entities, and even be held responsible for violations and criminal offenses, such as fraud. Many corporations are created as entities of perpetual duration and can exist indefinitely until legally dissolved voluntarily by members or shareholders, statutorily, or by court order.

Corporate Litigation
Corporate litigation is a complex area of law that can include a variety of tort and contractual claims, such as breach of contract, fraud, infringement of intellectual property, and breach of fiduciary duties. Commercial insurance disputes can also be a source of litigation when an insurance claim is undervalued and denied as a fair claim requiring the claimant to sue to recover the amount they are entitled to. During any corporate or business dispute, it is advisable to attempt to resolve the dispute through negotiation or arbitration. However, if the dispute(s) cannot be resolved, litigation can be utilized to resolve the dispute(s).

Corporate Disputes and Legal Considerations
  • Employment Law Disputes
  • Corporate Contract Negotiation
  • Breach of Contract and General Contract Disputes
  • Payment Disputes
  • Non-Compete Agreements
  • Property sell and purchasing
  • Mergers and Acquisitions
  • Commercial Leasing Disputes
  • Insurance Disputes
  • Employee Fraud/Embezzlement
  • Corporate Partnership Disputes
  • Business Torts
Why Companies in Litigation Over 500K Should Conduct Asset Searches
When facing corporate litigation in excess of $500K, the decision makers of the corporation must take into consideration the cost of legal representation, if the defendant has assets and evaluate if the costs of litigation are worthwhile. A comprehensive asset search can quickly identify property that could be attached to satisfy a judgment if located or be used as a powerful negotiation tool between the parties prior to ever initiating a lawsuit. It is recommended any corporation weighing the pros and cons of pursuing litigation that may result in a judgment in excess of $500K first have an all-inclusive asset search conducted to determine if a judgment can be collected.

Private investigators and investigative firms have the capability of assisting a corporation even prior to initiating litigation by reviewing financial records, trace and discover fiscal misrepresentations, confirm accurate financial information and locate hidden assets enabling corporate representatives to make an informed decision whether to pursue litigation. If litigation is pursued, it becomes paramount to ensure the information collected is comprehensive and presented in an understandable and simplified form that will be admissible in court.

The Role of In-House Corporate Attorneys
An in-house corporate attorney advises corporations on the entity’s legal rights, duties and responsibilities of the corporate officers, along with ensuring all commercial transactions and contracts are handled legally. Corporate lawyers typically have experience and knowledge in licensing, contract and tax law, corporate structure, zoning, security law, accounting, intellectual rights, bankruptcy and any other laws specific to the companies they represent.

In-house corporate attorneys act more as facilitators and negotiators in the role of corporate transactions, reviewing and drafting documents, structuring deals and attending meetings. A corporate attorney’s duties can vary from acting in an advisory capacity to negotiating corporate mergers and acquisitions.

An in-house corporate attorney who primarily acts in an advisory and negotiation capacity,
may determine that civil litigation is the only way to remedy a dispute.











The Role of an Outside Civil Litigation Attorney

An in-house corporate attorney who primarily acts in an advisory and negotiation capacity, may determine that civil litigation is the only way to remedy a dispute. A civil attorney deals specifically with disputes between corporations and /or individuals and is a branch of law focused on representing those who compensation may be awarded. Civil litigation typically focuses on contracts, torts, and other disputes as mentioned above.

Civil law is different from other types of law as it is designed to ensure agreements are honored and settle disputes; in essence to ‘right a wrong’ and ensure the victim is compensated. In any type of case it is important for a corporation or attorney to conduct due diligence on the potential defendant before expending money and time in pursuing a claim that may never be repaid because the defendant has no assets, has minimized or successfully hidden assets.

The Role of Creditor Rights Attorney
Creditor Rights Attorneys represent creditors who are attempting to collect money borrowed and loans not repaid. While debtors are protected by the Fair Collections Practices Act, it is still necessary for the creditor to make every attempt to obtain a judgment requiring the debtor to repay the loan. Debt falls into two categories; secured and unsecured.

Secured debt is when a loan is secured with collateral with some type of property to ensure repayment should the debtor fail to make payments. An unsecured loan is debt that has no property or collateral to secure the loan, therefore if the debtor defaults the creditor must make attempts to collect the amounts owed. Repossession of secured personal property must follow State Uniform Commercial Code (UCC). Creditor Rights Attorneys assist creditors with creditor litigation, liens, domestic and foreign judgments, garnishments and collection services.

Types of Services That Can Assist Corporations and Attorneys in Due Diligence Asset Searches
Asset search companies and licensed private investigative firms that specialize in providing comprehensive asset searches can provide invaluable assistance to attorneys and corporations such as financial institutions, debt recovery units, government agencies, and private individuals in recovering assets.
  • Corporate Summaries identify corporate EIN, DUNS, estimated sales, and income; to include the number of employees, operating locations, employee profiles and structure of the potential target corporation.
  • Identify names of Officers and Directors and management teams of potential target corporation.
  • Identified potential target corporation’s clientele, nature of business and volume of business with each clientele.
  • Identifies potential target corporation’s vendors, suppliers, logistics and financial institutions.
  • Credit and payment analysis for 12-36 months to include creditors and debt amounts.
  • Search of court records.
  • Identifies all physical locations of potential target corporation and tangible assets and on-site physical confirmation of assets such as machinery and equipment.
  • Analyze annual production capacity.
  • Identify financial institutions, brokerage firms and off-shore assets.
  • Domain names, website traffic and domain’s estimated value.

Author - Kym L. Pasqualini

Please contact Indianapolis Private Investigator, Thomas Lauth, for any investigations needed at 800.889.3463 or visit www.lauthinvestigations.com