WESLEY B. HOWARD
E-MAIL:
whoward@bbhlegal.com
DIRECT PHONE: 303-267-6530
U. S. Laws Impacting Mexican Investors
General Course Outline
1.
Formal Characteristics
a.
Federalism:
The Federal government and the State governments co-exist. The U.S. Constitution defines what the
Federal Government has exclusive jurisdiction over, what powers are reserved
for the States, what powers are denied to the States, and what neither Federal
nor State governments can do.
b.
International Treaties signed by the U.S. take
precedence over State laws and Federal laws.
c.
Judicial Branch - Both Federal and State courts
have power to determine if legislation or acts by the Executive are
Constitutional Each State has its own
court system for trials and appeals.
d.
Stare
Decisis: Judges give consideration
prior rule of law decided in prior cases, which are called legal
precedents. Courts must follow legal
precedents when the prior cases have been decided by higher courts. If a legal issue is novel and no statute or prior case
law in that jurisdiction has decided it, courts have authority to create new
law.
2.
The Federal System - Powers of the Federal,
State and Local Governments
a.
State power is extensive, including controlling
crime, land use, property sales, securities sold or purchased in the State,
employment rights, interpretation of contracts, tort cases (such as personal
injuries), State taxation, State voting rights, and determining rights or
duties created or governed by State legislation, unless they conflict with
federal law.
b.
Federal power "preempts" (or takes
precedence over) State power, but only when U. S. law directly conflicts with a
State law in an area in which the federal government has authority to rule based on the U. S.
Constitution. For instance, the U.S.
Constitution gives the federal government exclusive jurisdiction over
"interstate commerce" (including trade and crime); immigration;
rights guaranteed by the Bill of Rights in the U.S. Constitution; and federal
taxation or international relations.
c.
Federal courts have jurisdiction over cases dealing
with federal statutes or the U. S. Constitution and also in disputes between
parties of different States ("diversity jurisdiction"). State courts have jurisdiction over all other
cases.
d.
Municipalities have their own legislatures,
executive branches, courts, and the power to impose taxes. Municipal law (often called
"ordinances") governs matters of local concern so long as the
municipality has been given the right of self governance by the State
Legislature.
3.
Common Law System
a.
Importance of Judge-Made or "Case Law"
(i)
Courts (Judges) follow case precedent which is
binding.
(ii)
Judgments can be overturned by appellate courts
for failure to follow case precedent.
(iii)
Most rules of law are established by judges in
prior cases, which create legal precedent.
b.
Independence of Judiciary, whether elected or
appointed
(i)
Federal judges are appointed for life
(ii)
State court judges serve terms of years, either
through appointment by the executive (State governor or city mayor) and popular
vote retention or by popular election
c.
Jury trials
(i)
In jury trials, juries find the "facts"
and judges determine the "law", in both civil and criminal cases
(ii)
Right to a jury trial
(a)
Federal right to jury trial in all criminal and
civil cases
(b)
State right to jury trial depends on State constitution,
but often for all criminal cases and civil cases involving claims "at
law", but not "in equity"
(1) Cases
"at law" involve money damages claims
(2) Cases
"in equity" involve judicial power, e.g. injunctions or declaratory
judgments.
4.
Procedural Aspects
a.
Litigation is governed by an adversary system,
where parties present their arguments and witnesses, cross-examine the
opponent's witnesses, and essentially control the process, subject to rulings
by the judge as to what the law requires.
b.
The fact finder (Judge or Jury) remains neutral
until all the evidence has been presented by the parties.
c.
Judges interpret the law and decide what
evidence is admissible and what instructions to give the jury about which laws
apply to the case.
5.
Distinct Training of Lawyers in Common Law vs.
Civil Law Systems
a.
In the U.S., to become a lawyer one must first
obtain a bachelor's degree (typically 4 years), obtain a juris doctor (J.D.)
degree from a law school (3-year-program).
b.
Before being licensed to practice, the person
must first pass the Bar of the State where the attorney wants to practice law.
6.
After law school, preparation for the Bar Exam
is State specific and licensing is also State specific. Lawyers are licensed to practice only by States. A lawyer's ethical conduct is overseen and
regulated by the Supreme Court of the State in which he is licensed.
1.
Based on written U. S. Federal and State
constitutions, as interpreted by courts
2.
The U.S. Constitution can be amended, by a
combination of majority votes of State legislatures and the U.S. Congress. The first ten amendments are known as the
Bill of Rights, which protects such things as freedom of press, assembly and
religion; right to "bear arms" (own and use guns); freedom from
illegal search and seizure; right to jury trial; freedom from illegal discrimination
based on race, color or creed; freedom of property, etc.
1.
Advantages
a. Business
confidentiality
b. Opportunity
to use existing technology and intellectual capital
c. Ability
to use
(i)
Brand recognition
(ii)
Product recognition
(iii)
Service recognition
2. Disadvantages
a.
Difficulty of external financing without proven
profitability
b.
Difficulties in finding and training competent management
c.
Adapting domestic (Mexican) methods of doing
business to a foreign (EEUU) environment
1. Advantages
a.
Opportunity to investigate the finances,
operations and other aspects of the target business (complete “due diligence”)
b.
Ability to negotiate a fair price
2. Disadvantages
a.
Uncertainty of ability to acquire
b.
Uncertain time frame – potential delays - lack
of control over timing and terms of the sale or acquisition.
1. Friendly
mergers
2. “Hostile
takeovers” of public companies
3. Must
comply with securities laws and regulations and tax codes and regulations
4. Requires
expert tax, financial, banking, and legal advice
1. Equity-based
ventures or alliances
a.
Minority stock investments
b.
Joint ventures
c.
Majority stock investments
2. Non-equity
ventures or alliances, established by contract
a.
Parties’ responsibilities are defined and
explained
b.
Mode of operations stipulated or stated
c.
Method of termination or continuation agreed
upon
1. Selling
shares through an “initial public offering” or “IPO” requires extensive
financial and legal assistance to insure compliance with Federal and State
securities laws
2. Important
factors for success
a.
Management strength, competence and experience
b.
Size, earnings and past performance (normally
past five years)
c.
Potential for growth
1. “Greenfield”
investments
a.
Creation of new production capacity and jobs
b.
Transfer technology
c.
Potential linkages to global marketplace
(leading to US export sales)
d.
Potential for tax incentives or government
subsidized loans
1.
Administered by the SBA, a federal agency
2.
Available only for businesses which are
independently owned and operated and not dominant in their fields or areas of
business
3.
Provides a variety of lower interest loans and
loan guaranties for businesses in many industries and fields of business –
criteria or qualification standards vary depending on the industry
4.
Borrowers must first demonstrate they cannot
obtain reasonable financing from banks or other private sources
5.
SBA loans or guaranties and loans from SBA
licensed “small business investment companies” are available to foreign
companies incorporated in the United States
1.
Federal, State and Local entities all may assess
certain taxes
2.
Income taxation (Federal and State)
3.
Property taxation (State and Local)
4.
Sales and use taxation (Federal (limited), State
and Local)
5.
Estate and inheritance (Federal and State)
1.
Corporations are taxable entities
2.
Taxed on net profits at the corporate
3.
Distributions of after-tax income to
shareholders are based as dividends, but general at a lower
("preferential") rate
1.
Domestic corporations are defined as those created
or organized under the laws of the U.S., any U.S. State or the District of
Columbia
2.
Subject to tax on worldwide income
1.
Foreign corporations not engaged in a U.S. Trade
or business are taxed on certain U.S. source gross investment and other passive
income
2.
Gains from dispositions of U.S. real property
interests are taxable
3.
Foreign corporations are defined as those
created or organized anywhere outside of the U.S.
4.
Where a corporation's management or control
headquarters are located does not determine the place of residency for U.S. tax
purposes
1.
Taxable income is defined as gross income, less
exempt income, less deductions (such as ordinary and necessary business
expenses)
2.
Gross income is income from any source
(including business income, property gains, passive income such as interest,
rents, royalties, dividends (unless the dividends are from tax-exempt bonds
issued by a State or municipality) and earnings from services
3.
Gross income is not the same as gross revenues,
from which the cost of goods sold is subtracted
4.
The amount of tax is determined by multiplying
taxable income (or alternative minimum taxable income) by the applicable tax
rate
5.
Credits (such as foreign tax credits) may be
available to reduce federal income tax liability. Rules are complex
1.
Generally treated as "pass-through entities",
which means they are not taxed at the entity level
2.
Each partner or member is subject to tax on its
share of profit or loss
3.
Liability for tax applies regardless of whether
or not profits are distributed to the partner
4.
Withholding a portion of a partner's income and
paying it to the government in advance generally applies to a foreign partner's
allocable share of income
5.
Any domestic unincorporated business entity with
two or more members can elect to be treated for tax purposes like a corporation
or a partnership
6.
Domestic single member unincorporated business
entities can elect to be treated as corporations for tax purposes or to be
disregarded (resulting in taxation of income as if earned b the individual
owner)
7.
Non-U.S. entities can generally make the same
elections as domestic entities, although certain non-U.S. entities are
automatically treated as corporations for U.S. tax purposes.
1.
Foreign investors (both non-resident aliens and
foreign corporations) are subject to U.S. income tax on two types of income.
a.
Certain U.S. source income that is not
effectively connected with a U.S. trade or business.
b.
Income effectively connected with a U.S. trade
or business.
2.
A 30% withholding tax is usually imposed on U.S.
source income not effectively connected with a U.S. trade or business.
3.
Income effectively connected with a U.S. trade
or business is subject to two levels of tax.
a.
A regular income tax on net income and a
withholding tax on income distributed to a foreign investor; and
b.
Foreign investors may also be subject to taxes
on disposition of real property interests.
c.
Foreign corporate investors are subject to U.S.
federal income tax on income effectively connected with a U.S. trade or
business. Absent an international
treaty, the concept of permanent establishment is not applicable.
d.
All U.S. source "fixed or determinable
annual or periodical income" (FDAP), as well as capital gains, are
"effectively connected to a U.S. trade or business", if they meet
either of two tests:
(i)
The Asset Use Test - is the income or gain
derived in the active conduct of a U.S. trade or business?
(ii)
The Business Activities Test - are the activities
of the U.S. trade or business a material factor in the realization of the
income?
e.
The "Force of Attraction Rule" deems
all income earned by a foreign investor from U.S. sources (other than FDAP and
capital gains) to be "effectively connected with a U.S. trade or
business."
f.
Foreign investors are not subject to tax in the
U.S. on capital gains, including gains from the sale of stock of other
corporations and gains from the sale of stock of U.S. domestic corporations,
unless such gains are effectively connected with a U.S. trade or business.
4.
Branch taxes.
a.
Branch profits tax treats a branch like a
corporation by imposing two levels of taxes - effectively connected income and
also certain branch taxation including branch profits tax, branch - level
interest tax, and branch tax on excess interest. The purpose of the branch profits tax is to
protect the classic two-tier taxation regime that the U.S. imposes on
corporations.
b.
Generally branch profits taxes impose taxes on
the profits of a foreign corporation's U.S. business operations that are
"deemed repatriated" from the U.S. at the end of the tax year. The deemed dividend amount is subject to a
30% tax.
c.
Branch-level interest tax treats interest paid
by a foreign corporation's U.S. trade or business as if it were paid by a
domestic corporation, subjecting it to a 30% U.S. withholding tax.
5.
FIRPTA - dispositions of U.S. real property
interests.
a.
The Foreign Investment in Real Property Tax Act
of 1980 (FIRPTA) treats a foreign investor's income from disposing of U.S. real
property as if the income was connected with a U.S. trade or business and taxed
at regular income tax rates. The buyer
of any U.S. real property interest is required to withhold ten percent of the
amount realized by the foreign seller and remit it to the Internal Revenue
Service ("IRS") of the U.S. federal government. The foreign investor can agree with the IRS
in advance to reduce the amount of withholding.
A refund is owed if the withholding exceeds the maximum tax liability.
6.
Foreign Investors Operating Through Domestic
Corporations
a.
Foreign investors can invest in the U.S. through
a domestic corporation. Key concepts for
this investment are transfer pricing; earnings stripping rules; check the box
rules; and domestic reverse hybrids.
(i)
Transfer pricing - IRS can adjust transfer
prices between commonly-controlled parties if price is not arm's-length.
(ii)
Earnings - stripping rules limit the domestic
corporation's income deduction when it makes a substantial interest payment to
a foreign-related person who is not subject to U.S. tax (in whole or in
part). An example is when the
foreign-related person is eligible to claim a reduced or zero withholding under
a U.S. tax treaty.
(iii)
Check the box rules and domestic reverse hybrids
allow a foreign investor to elect how an entity will be classified for U.S.
federal income tax purposes, for example, by structuring its investment as a
"domestic reverse hybrid entity." This allows start-up costs to flow through to
the entity's foreign investors for foreign tax purposes while the entity
retains the benefits of operating through an entity classified as a corporation
for U.S. federal income tax purposes.
b.
The following reduced divided rates by
international agreement apply to Mexican investors - individuals and companies
- 10%; qualifying companies - 0% to 5%; interest - 15%; and royalties -
10%.
1.
Franchise taxes can be measured by income, net
worth or a combination of both. Each jurisdiction
can impose a franchise tax and/or an income tax.
2.
Investors should review the laws of each of the States
in which it does business to determine specific tax obligations.
3.
Generally, for States to tax a corporation there
must be a "nexus" such as owning property or employing people
there. State taxation generally depends
on the amount of business apportioned to that State. Some States require separate corporate
returns. Others allow related entities
to file on a combined basis.
4.
Sales and use taxes. Treaty provisions do not usually cover taxes
imposed by States or localities; most States and the District of Columbia, as
well as thousands of local governments, impose sales and use taxes.
a.
Sales taxes are usually levied on the gross
consideration derived from retail sales, transfers or rentals and selected
services in the State.
b.
Use taxes are imposed on the use, storage or
consumption of taxable personal property and taxable services in a State.
c.
Sales and use tax laws and regulations differ
from State to State and municipality to municipality, so expert tax advice
should be obtained in each jurisdiction.
1.
Foreign citizens who are U.S. residents are
taxed by the U.S. just like U.S. citizens (world-wide income being subject to
U.S. income tax).
2.
A foreign citizen is generally treated as a
non-resident for U.S. tax purposes unless the citizen qualifies as a U.S. resident
(an individual who is either a lawful permanent resident (green card holder) or
who meets the "substantial presence" test). The substantial presence test: physical presence in the U.S. for at least 31
days in the calendar year and 183 days during the current and two preceding
years, counting all days in the current year, one-third of the days in the
first preceding year, and one-sixth of the days in the second preceding year.
3.
Filing status - both spouses must be citizens or
residents of the U.S. at all times during the year before a joint return can be
filed.
4.
Taxable income of non-residents.
a.
A non-resident is generally subject to U.S. tax
only on income from U.S. sources.
b.
A non-resident's capital gains (excluding real
estate) are nontaxable.
1.
Contract law and tort law are based mainly on
principles governing the rights and duties of parties decided by courts.
2.
Those legal principles are based on English law
adopted by the federal government and all State governments (except for the
State of Louisiana, which has a civil law system).
3.
Contract law governs the making and breaking of
agreements by parties (including governmental entities).
4.
Tort law involves civil wrongs or damages caused
by one party against another (including governmental entities).
1.
Very few formalities are required, compared to
civil law systems such as Mexico
a.
Verbal or oral contracts may be binding and
enforceable (except for contracts to purchase interests in real property and
contracts of employment for more than one year).
b.
Key concepts
(i)
Mutual consideration
(ii)
A "meeting of the minds"
(iii)
"Bargained for Exchange"
(iv)
Conditions and Excuses
c.
Promissory Estoppel (a "contract
substitute" theory)
(i)
Through this legal doctrine, a party may be
bound to perform as if there were a contract, even though none exists.
(ii)
The test is whether the conduct of one party leads
the other party to reasonably rely on that conduct to the other party's
detriment or loss.
d.
Remedy for breach of contract is a court order
requiring the breaching party (the Defendant) to give the other party (the
Plaintiff) the "Benefit of the Bargain."
1.
Breach of Fiduciary Duty
a.
Special duty of trust or confidence.
b.
Applies to such professionals as lawyers,
doctors, or certified public accountants who have special expertise on which
their clients or patients rely.
2.
Liability for Defective Products
a.
Liability can be imposed on sellers,
distributors, wholesalers and manufacturers.
b.
Cases can be brought by injured parties on their
own behalf or on behalf of an entire class of purchasers.
3.
Trespass and Nuisance
a.
Applies to protect users of land from physical
intrusion by others (including noxious fumes, noise, flooding).
b.
Requires proof of causation.
4.
Damages and Insurance
a.
Compensatory versus Punitive or Exemplary
Damages
b.
Insurance Law
5.
Defamation
a.
Libel
b.
Slander
c.
Privileges
6.
Interference With Prospective Business Advantage
a.
Interference with contact
b.
Interference With Prospective Business Advantage
7.
Negligence
a.
Elements
(i)
Defendant owes a duty of due care (being
reasonably careful) to plaintiff
(ii)
Defendant breaches its duty
(iii)
The breach proximately causes injury to
plaintiff
b.
Damages result from a finding that defendant is
liable by a preponderance of evidence.
8.
Strict Liability (explosives, for example)
9.
Misrepresentation
a.
Fraud
b.
Negligent misrepresentation
1.
Non-immigrant Visas: There are many types of non-immigrant visas;
all designated by letters of the alphabet; some allow a person to work and/or
invest in the U.S.
2.
Immigrant Visas:
Also known as "green cards", allow a person and his/her
immediate family to live and work permanently in the U.S.
1.
B-1 Visa:
This is a Business Visitor Visa that allows its holder to come to the
U.S. to conduct business. This includes: attending meetings, negotiating contracts;
observing operations; etc. It does not
permit "employment" in the U.S.
The visa is applied for at a U.S. Consulate in Mexico.
2.
E-1/E-2 Visa:
These are "Treaty Visas" created by the North American Free
Trade Agreement (NAFTA) that allow Mexican citizens to own, run or work for a
business that is engaged in "substantial trade" between the U.S. and
Mexico (E-1 visa), or invest in or work for an "active enterprise"
(as opposed to passive investment such as owning real estate) in the U.S. that
is at least 51% owned by Mexican and into which a "substantial
investment" has been made by a Mexican citizen.
a.
The E-1 visa requires that a business be set up
in the U.S. that engages in trade with Mexico.
This can be trade in tangible goods or in services.
b.
The E-2 visa requires that a Mexican citizen
makes a substantial investment in the U.S. (usually a minimum of
$50,000-$100,000, depending on the type of business).
c.
In most cases, the application for E-1 or E-2
visas are made directly at a U.S. Consulate in Mexico.
d.
E-1/E-2 visas for Mexicans are issued for 1 year
at a time, and can be renewed indefinitely as long as the trade continues or
the investment is in place.
3.
L-1 Visa:
The L-1 visa permits the transfer of certain workers from companies in
Mexico to affiliated operations in the U.S.; these individuals are called
Intracompany Transferees.
a.
The L-1A is for individuals who are coming to
the U.S. to work in managerial or executive positions.
b.
The L-1B is for individuals who have specialized
knowledge of the processes and procedures of the employer's business both in
Mexico and in the U.S.
c.
The individual must have worked for the
operation abroad (outside the U.S.) for 1 out of the last 3 years as a manger,
executive or individual with specialized knowledge.
d.
The application must establish the
"affiliation" between the company in Mexico and the one in the U.S.,
such as parent/subsidiary; a "sister" company; a joint venture, or a
branch office.
e.
The company abroad must continue to do business
during the entire time that the beneficiary of the L visa is in the U.S., or
the U.S. company must have other international operations.
f.
The beneficiary of an L-1A may remain in the
U.S. for 7 years; the L-1B is limited to 5 years.
g.
The petition for the L-1 visa is filed with the
United States citizenship and Immigration Services (USCIS) in the U.S. A beneficiary in Mexico would take the
approval notice from USCIS and apply for a visa at the U.S. Consulate in
Mexico.
1.
Overview of the EB-5 Program
a.
Buy or create a commercial enterprise that
creates at least 10 jobs.
b.
Invest at least USD$1,000,000 or USD$500,000 in
a Targeted Employment Area (primarily rural areas or high unemployment
urban areas)..
c.
The investment must be in a "new"
enterprise, which is defined as one created after November 29, 1990.
d.
If the investment is made in an existing
business, there must be a significant re-organization for the enterprise to be
considered "new."
e.
The investor must be involved in the day-to-day
operations of the business.
2.
Overview of the Regional Center Program
a.
The Federal Government allows State or local
governments or private entrepreneurs to form Regional Centers. There are more than 200 Regional Centers
across the United States. Regional
Centers can have many different forms and many different objectives.
b.
A foreign investor can invest $500,000 in a
Regional Center, and can then apply for Conditional Permanent Residence.
c.
There are important tax implications when
someone invests $500,000 in the U.S., so it is important for the investor to
seek tax advice before making the investment.
d.
The investor should also seek the advice of an
investment advisor before investing in a Regional Center.
e.
The Conditional Permanent Residence is valid for
2 years. If the investment is still in
place, the investor can apply to have the conditions removed, and will be given
a "green card" for 10 years.
f.
Each Regional Center has different business
forms, features and exit provisions, and as with any investment, the prospectus
should be carefully reviewed prior to investing. Many of the Regional Centers encourage
potential investors to visit their sites.
It is important for potential investors to utilize appropriate counsel
to fully understand the tax and business implications of their investment.
1.
Historical and Cultural Perspective
2.
Federal Regulatory Scheme
3.
Sources of Federal Securities Law
4.
State Securities Law
1.
Steps in a Registered Offering
a.
Hiring Underwriting Process
b.
Preliminary Prospectus
c.
Filing Registration Statement
d.
Sales
2.
Securities Act Registration process/SEC
Disclosure Requirements
1.
A security is defined broadly by the Securities
Act and includes whenever a person invests money in a "common
enterprise" and is led to expect profits from efforts of someone else.
2.
A sale can involve exchanges of securities, such
as a merger.
1.
Defined by the Securities Act.
a.
Private Placements: Section 4(2)
b.
Intrastate Offerings: Section 3(1)(11) and Rule 147
c.
Limited Offerings: Sections 3(b), 4(2), and 4(6); Regulations A
and D; Rules 701-703
1.
Criminal and other Government actions, such as
being barred from selling by the Securities and Exchange Commission (SEC).
2.
Civil liability.
3.
Indemnification and contribution among person jointly
liable.
1.
Criminal and Civil liability
2.
"In Connection With" requirements
3.
Reliance and Causation
4.
"Purchaser-Seller" Requirement
5.
Fault required
6.
Issuers' duty to disclose
1.
Federal statutes, interpreted by case law
2.
State statutes, interpreted by case law
3.
Common law fraud claims
1.
Exceptions for employment contracts and unlawful
discrimination
2.
Discrimination claims are governed by federal
and/or State law
1.
Actual authority
2.
Apparent authority
3.
Disclosed versus undisclosed principals
4.
Duties of agents (including employees)
1.
The Fee Simple
2.
The Life Estate
3.
Leasehold Estates
1.
The Lease - a written description of the rights
and obligations of Landlord and Tenant, not required to be filed in public records,
notarized, or to contain proof of signatory's authority.
2.
Selection of Tenants - Unlawful Discrimination
is prohibited - denial of tenants based on race, religion, color, national
origin or ethnicity.
3.
Subleases and Assignments
4.
The Tenant's Duties
a.
Rent.
b.
Maintenance and Upkeep.
5.
Landlord's Duties; Tenant's Rights and Remedies
a.
Quiet enjoyment and constructive eviction.
b.
The implied warranty of habitability
c.
Tenant's Duties; Landlord's Rights and Remedies
1.
Introduction to Buying and Selling Real Estate
2.
Brokers
3.
The Contract of Sale
a.
The Statute of Frauds
b.
Marketable Title
c.
The Duty to Disclose Defects
d.
The Implied Warranty of Quality
e.
Remedies for Breach of the Sales Contract
4.
The Deed
a.
Warranties of Title
(i)
General Warranty Deed and Special Warranty Deed
b.
Delivery
c.
The Mortgage
1.
The Recording System
a.
Title Indexes and Recording Acts
b.
Chain of Title Problems
1.
Creations of Local Government
2.
The Comprehensive Plan
3.
The Nonconforming Use
4.
Variances and Special Exceptions
5.
Zoning Amendments and the Spot Zoning Problem
1.
The Power of Eminent Domain and Just
Compensation
1.
Elements of an Agency Relationship
2.
Uses of Agency; Ambiguity of the Word
"Agency"
a.
The Electronic Agent
b.
The Escrow Agent
3.
The Principal
4.
The Agent
1.
Duty to Pay Compensation
2.
Duty of Reimbursement, Indemnity, and
Exoneration
3.
Duty to Deal Fairly and in Good Faith
1.
Duty of good conduct; Duty to Obey
2.
Duty to Indemnify Principal for Loss Caused by
Misconduct
3.
Duty to Account
4.
Duty of Care and Full Disclosure
5.
Duty of Loyalty
a.
Loyalty During the Relationship
(i)
Scope of Fiduciary duty
(ii)
Misusing Information
b.
Post-Termination competition
(i)
Trade Secrets
(ii)
Covenants Not to Compete
c.
Pre-Empting Business Opportunities
1.
Respondeat
Superior
2.
Direct Tort Liability of an Employer
3.
Liability of the Employee
4.
The Independent Contractor Exception of the
Second Restatement
5.
The Scope of Employment Limitation
a.
Negligence
b.
Intentional Torts
6.
Punitive Damages
1.
The Authority of an Agent
2.
Express Authority
a.
The Power of Attorney
(i)
Statutory Short form Power of Attorney
(ii)
Durable Power of Attorney
(iii)
Springing Power of Attorney
b.
The Equal Dignity Rule
3.
Implied Authority
a.
Conceptual Basis of Implied authority
b.
Incidental Authority
c.
Delegation of Authority
(i)
Subagent
(ii)
Agent's Agent
(iii)
Co-agent
4.
Apparent Authority
5.
Estoppel
1.
Instructor website: www.bbhlegal.com
2.
Course outline in English:
3.
Course outline in Spanish:
A......... To better acquaint you with
basic principles of U.S. law.............................................. 1
B......... To help you identify important
issues under U.S. laws that might affect your clients' investment decisions.................................................................................................. 1
C......... To give you a basic vocabulary
to help guide your advice to your Mexican investor clients. 1
D......... Instructor's Background............................................................................................ 1
II......... Introduction to U. S. Legal
System......................................................................................... 1
A......... Overview of the Common Law
System and the Role of Lawyers and Judges............... 1
B......... Constitutional Law.................................................................................................... 3
III........ Investment Methods - Note: unlike Mexico, the U.S. does not restrict
foreign investment in areas such as oil and gas, utilities, or other such
industries. U.S. has no history of
nationalizing industries and U.S. Constitution prohibits government from taking
private property without just compensation.. 3
A......... Build.............................................................................................................. 4
B......... Buy.................................................................................................................... 4
C......... Mergers or Acquisitions............................................................................................ 4
D......... Joint Ventures and Strategic
Alliances........................................................................ 5
E.......... “Going Public”........................................................................................................... 5
F.......... Tax Incentives – Federal and
State............................................................................ 5
G......... Small Business Administration
(“SBA”) Loans............................................................. 5
IV........ Taxation........................................................................................................................ 6
A......... Overview........................................................................................................ 6
B......... Corporate taxation, in general................................................................................... 6
C......... Domestic corporations.............................................................................................. 6
D......... Foreign corporations................................................................................................. 6
E.......... Taxable income......................................................................................................... 7
F.......... Partnerships and limited
liability companies (LLCs)..................................................... 7
G......... Foreign investors...................................................................................................... 7
H......... State and local taxes (virtually
all States and the District of Columbia impose corporate income and/or
franchise taxes, and some States impose income tax on unincorporated businesses
(LLCs and partnerships)).................................................................................................... 9
I.......... Taxation of foreigners............................................................................................ 10
V......... The Law of Contracts and The Law
of Torts........................................................................... 10
A......... History and distinctions.......................................................................................... 10
B......... Contracts........................................................................................................ 11
C......... Torts - remedies for committing
a tort can include not only compensatory, but also punitive or exemplary,
damages.............................................................................................. 11
VI........ Immigration Laws............................................................................................................... 13
A......... General: Types of visas........................................................................................... 13
B......... Non-immigrant Visas............................................................................................... 13
C......... Immigrant Visas for Investors.................................................................................. 14
VII....... Securities Law.................................................................................................................... 15
A......... Introduction................................................................................................... 15
B......... Securities Act Registration
(Securities Act of 1933).................................................... 15
C......... Reach of Securities Act
Regulation........................................................................... 15
D......... Exemptions from Securities Act
Registration Requirements...................................... 15
E.......... Liability for Securities Act
Violations......................................................................... 16
F.......... Fraud in the Purchase or Sale
of Securities: Rule 10b-5............................................. 16
G......... Securities Regulation............................................................................................... 16
VIII......
Labor and Employment Law............................................................................................... 16
A......... Employment at will doctrine
(varies from State to State).......................................... 16
B......... Non-compete or non-competition
agreements....................................................... 16
C......... Wage and hour legislation
(Federal and State)......................................................... 16
D......... Unemployment and workers
compensation taxes and insurance............................. 16
E.......... Agents and principal law.......................................................................................... 16
IX........ The Law of Property - Foreign
citizens can purchase real estate (land, buildings, or other interests in real
property) anywhere in the U.S.).......................................................................................... 17
A......... Possessory Estates.................................................................................................. 17
B......... Landlord-Tenant Law............................................................................................... 17
C......... The Land Transaction............................................................................................... 17
D......... Title Assurance........................................................................................................ 18
E.......... Title Insurance........................................................................................................ 18
F.......... Zoning............................................................................................................. 18
G......... Eminent Domain and the Problem
of Regulatory Takings.......................................... 18
X......... The Law of Agency (Agents and
Principals)........................................................................... 18
A......... The Agency Relationship......................................................................................... 18
B......... Duties of Principal to Agent..................................................................................... 19
C......... Duties of Agent to Principal..................................................................................... 19
D......... Vicarious Tort Liability.............................................................................................. 19
E.......... Contractual Powers of Agents................................................................................. 20
XI........ CONCLUSION............................................................................................................ 20
A......... U.S.. law is complex, because it
changes through both court decisions and statutes. Expert legal representation is essential to
help avoid liability....................................................... 20
B......... U.S. Legal practice has become
increasingly specialized, requiring hiring U.S. counsel with experience in the
type of transaction or dispute facing the Mexican investor........... 21
C......... State law governs many
transactions and disputes, so hiring competent counsel in the State in which
the business takes place is key....................................................................... 21
D......... Always discuss estimated legal
fees and costs in advance, obtain a written legal engagement agreement or fee
agreement in advance, and monitor legal bills and work performed carefully.................................................................................................. 21
E.......... Websites for Instructor and
Course Materials.......................................................... 21
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