Free Resources for Irish and Northern Irish Companies Forming US Affiliates

I’ve written several times (Minimizing ‘Alter Ego’ Risk for Irish and Northern Irish Parents of US Affiliates; and Effectively Using a Lightning Rod) about the need for Irish and Northern Irish companies to form a formal US affiliate as part of their US expansion strategy. I know that several US law firms have free online forms libraries/generators for US startups. That got me thinking—where are the free online forms/resources for Irish and Northern Irish companies looking to expand to the US? Well, it’s right here.

Let’s assume that the Irish/Northern Irish company will form a Delaware corporation (which is what I’d recommend in many cases). For a proper/complete formation, the Irish/NI company would need to draft (i) articles of incorporation (to be filed with the Delaware Secretary of State’s Corporations Division); (ii) bylaws; (iii) an initial action/consent of the incorporator; (iv) initial consent of the Board of Directors; and (v) SS-4/application for an employer identification number (to be completed and filed with the IRS). The filing with Delaware requires payment of a filing fee—and a filer can pay more for expedited service and other items; also, since the Irish/NI company is, well, in Ireland/NI, they will have to engage a registered agent (the registered agent serves as a point of contact between the company and the State of Delaware). And, filing can be made directly by the Irish/NI company—no real need to incur third-party filing or convenience fees. Continue reading

Minimizing ‘Alter Ego’ Risk for Irish and Northern Irish Parents of US Affiliates

Previously, I’ve written how forming a U.S. affiliate can be like using a lightning rod for U.S. litigation risk. Properly used, a U.S. affiliate can help keep U.S. litigation risk away from the Irish/NI parent and its investors. Forming a U.S. affiliate is not enough, and the lightning rod is useless if the U.S. affiliate is considered to be an ‘alter ego’ of the Irish/NI parent.

The corporation (and limited liability company) form in the U.S. generally shields an entity’s investors from the entity’s liabilities; investors would stand to lose their investment, and nothing more, if the entity collapses. There are some limited circumstances where an American court can ‘pierce the veil’ of this liability shield, and impose entity liabilities on an investor—one of those circumstances is when the entity in question is an ‘alter ego’ of one if its investors. In other words, if a U.S. affiliate were deemed to be an ‘alter ego’ of its Irish or Northern Irish parent, the parent and its investors could be responsible for the U.S. affiliate’s liabilities.

When determining whether a subsidiary is an alter-ego of its parent, U.S. courts consider many factors, including whether the:

  • Parent owns all of the stock in the subsidiary;
  • Subsidiary is adequately capitalized;
  • Corporate formalities are observed;
  • Parent and subsidiary share corporate officers and directors;
  • Subsidiary has its own offices, employees and bank accounts;
  • Parent pays the salaries of the employees of the subsidiary;
  • Parent siphons money out of the subsidiary;
  • Subsidiary and parent share administrative services, employees or insurance arrangements without proper, arm’s length compensation between them;
  • „Parent uses the subsidiary’s property as its own; and
  • Subsidiary’s function is a mere façade for the parent company.

Irish and Northern Irish parent companies can minimize the risk of having their U.S. affiliate being deemed to be an ‘alter ego’ of the parent by:

  • Properly capitalizing and insuring the subsidiary. U.S. courts are less likely to extend jurisdiction over foreign parent if the plaintiff can collect the full amount of a judgment against a properly capitalized U.S. corporation;
  • Complying with corporate formalities;
  • Creating the subsidiary’s own bank account;
  • Documenting rationale for the subsidiary’s capital structure;
  • Documenting inter-company loans;
  • Maintaining appropriate debt/equity balance;
  • Having the subsidiary hire and pay for its own employees; and
  • Creating the subsidiary’s own board of directors.

None of this is bullet-proof, of course, but the above steps should help the U.S. affiliate act like the lightning rod as intended.

It’s About the Process…

When Irish and Northern Irish companies ask if there is *one* thing they can or should do to minimize the risk of operating in the US, I channel my inner Mr. McGuire (from the movie The Graduate) and say ‘process.’ It’s not quite as pithy as ‘plastics,’ but it works. What I mean by that remark is this: adopting and consistently using a process for developing and executing US contracts will go a long way in terms of risk mitigation. Comprehensive, American-style contracts, and the process by which they are built, are the most powerful defenses in an Irish or Northern Irish company’s risk-avoidance arsenal. Continue reading

Everybody is an Employee…Maybe…Possibly

Businesses operating in or expanding to the US, including those from Ireland and Northern Ireland, use independent contractors to avoid some of the baggage associated with the employer/employee relationship under US law.  The use of independent contractors recently has gotten more complicated due to the US Department of Labor’s publication of Administrator’s Interpretation 2015-1.  The Interpretation is part of the Department’s closer monitoring of the ‘independent contractor’ designation. Businesses from Ireland or Northern Ireland operating in or expanding to the US, and using the services of an independent contractor (such as a sales agent) should take another look at how they designate a person as an ‘independent contractor,’ as soon as possible. Continue reading

Making US Arbitration Work for Irish and NI Companies (Really!)

Foreign investors increasingly complain that US arbitration is morphing in to a process closer to full-blown litigation. I’ve always found it interesting that ‘full-blown’ is used to describe ‘all-in’ litigation and ‘all-in’ infectious disease. But I digress. The fact remains that many of the advantages of arbitration—speedier resolutions at a lower cost—are being lost to a variety of interim challenges, enforcement questions and other processes that defer prompt resolution of disputes. The good news for Irish and Northern Irish companies is that Delaware offers a way to make arbitration ‘work’ again. Continue reading

Protecting Your Trade Secrets in the US

Remember earlier posts about non-disclosure agreements, and the role they play in defining and protecting trade secrets? Of course you do—but in case you don’t, one of them is here. I even drafted a brief two-page outline for NDAs, here.

The macro point of those posts, at least as to protecting trade secrets, is that in the US, a trade secrets owner must take all “reasonably available steps” to protect their trade secrets. In an unpublished opinion filed on May 8, 2015, the US Court of Continue reading

Of War Stories and Security Interests

This is a good ‘war story’ about getting paid.  The client was (and is) based in the European Union, and they sold product to the US market.  Their products were (and are) high-value, about $100,000+ per item. Not stuff I’d be able to buy, but I digress. The company insisted–strongly–on using their ‘home country’ terms and conditions of sale in the US, without thoroughly reviewing whether there was anything in the home country law that could adversely affect them in the US. We were not involved at that point. Continue reading