Source: https://melnickmelnick.com/category/updates/asked-and-answered/
Timestamp: 2019-04-25 02:33:21+00:00

Document:
Asked & Answered Archives - Melnick & Melnick, S.C.
A benefit corporation is a new type of entity created by the Wisconsin legislature to allow for-profit businesses to adopt a corporate structure that requires consideration of the public good as well as profits. Accordingly, the best interests of a benefit corporation (sometimes called a B corporation) extend beyond the corporation’s bottom line. A benefit corporation requires officers and directors to evaluate the effects of action or inaction on the public, the corporation’s community, and the local or global environment.
Must benefit corporations sacrifice profit for the greater good? Is a benefit corporation a non-profit?
No, benefit corporation officers and directors must also consider how its choices affect shareholders, employees, customers, and the entity’s short and long-term interests.
What are the requirements for a B corporation?
Comply with Wis. Stat. Chapter 180, except if it conflicts with Chapter 204, the public benefit corporation statute.
Can I form a benefit LLC?
No, Chapter 204 of the Wisconsin Statutes only allows benefit corporations.
When can I form a benefit corporation in Wisconsin?
The benefit corporation statute takes effect on February 26, 2018.
Can I convert my existing Wisconsin corporation to a benefit corporation?
Yes, existing corporations may amend their articles of incorporation to add a statement that the corporation is a benefit corporation.
I might be interested. Where can I find more information?
Wisconsin statutes Chapter 204 establishes benefit corporations. You’ll find general information about B corporations here. For help analyzing whether your specific business plan or existing corporation’s mission align with the benefit corporation benefits and requirements, please contact Stephanie at (262) 241-8900 or smelnick@melnickmelnick.com.
A new Department of Labor (DOL) rule requires financial professionals advising retirement savers to advance their clients’ best interests above their own profits. Known as the Fiduciary Rule, the White House Council of Economic Advisors estimates that it will save retirement savers $17 billion annually.
A conflict of interest arises when financial professionals recommend investments that benefit themselves financially (e.g., high commissions) but are not necessarily in their clients’ best interests.
How will the new rule affect me?
Financial professionals who offer advice regarding your retirement accounts must recommend investments that are in your best interests. In other words, financial professionals must act as a fiduciary in regard to your retirement accounts. There is a caveat, however. Advisors can continue receiving commissions if they sign a contract promising to charge “reasonable” fees and disclose conflicts of interest, among other things (see “Will I see new documentation?” on page 4).
What is a fiduciary? Why is important that my financial advisor is a fiduciary?
A fiduciary is required to put his client’s interests first and to eliminate or at least disclose conflicts of interest. In contrast, financial advisors who recommend investments based on “suitability” must have a “reasonable basis to believe” an investment is suitable for an investor based on various factors (e.g., age, tax status, investment objectives, liquidity needs, and risk tolerance). Here’s a common example: Mutual fund A pays a higher commission to the broker and is more expensive for the client to purchase and own. The broker can still recommend it as long as it’s suitable—even if mutual fund B is much cheaper for the client.
Who must follow the new rule?
Financial professionals—including brokers, insurance agents, and investment advisors—who provide retirement investment advice in exchange for a fee must act in the clients’ best interests (i.e., as a fiduciary).
Will I see new paperwork?
Yes, probably. Firms who will elect to continue to receive fees, including commissions, that may conflict with investors’ interests need to provide investors with a contract (the Best Interest Contract or BIC/BICE) promising the firm will: (1) act in the investors’ best interests; (2) charge “reasonable compensation”; (3) disclose how they are paid (including on the firm’s website); and (4) adopt policies and procedures to ensure compliance with the new rules. New customers will sign the contract when completing paperwork to open an account. Existing customers may receive a notice (by mail or email) disclosing the investors’ new rights. Investors are not required to take action, unless they wish to object to the terms outlined. The Best Interest Contract is not required until January 1, 2018.
Do investors have any recourse if an advisor fails to act in their best interests?
Investors have the right to pursue legal action if financial professionals do not comply with the new standards. Most disputes must still be resolved through arbitration (not in court), with a new and notable exception—investors may bring class action lawsuits.
The rule takes effect on April 1, 2017 but some requirements (e.g., the Best Interest Contract Exemption) allow phased implementation with full compliance required by January 1, 2018.
“Hire me” recommendations—financial advisors can urge you to hire them or their firms even if doing so is not really in your best interest.
Could the new administration block the rule?
Maybe, but not easily. The Fiduciary Rule is final and effective beginning on April 1, 2017. As a result, the new Secretary of Labor cannot repeal the Fiduciary Rule; although, he could delay implementation. The DOL could replace it, but the process—new regulations, public comment, modifications, and Office of Management and Budget’s analysis—is slow. Congress could pass legislation that would overturn or amend the rule but that, too, would be difficult, considering the makeup of the Senate and time-consuming process involved. The new administration could also choose not to enforce the Fiduciary Rule or decline to defend it in pending litigation. Notwithstanding the new administration’s opinion concerning the Fiduciary Rule, large wealth management firms have expended time and money preparing to comply, including using the new fiduciary standard as a marketing opportunity. And, buzz surrounding the Fiduciary Rule has awakened investors to the importance of hiring a fiduciary. As a result, political will to stop or delay the Fiduciary Rule may not be enough to motivate the new administration or Congress to take on the intricate and time-consuming task.
Where can I read more about the Fiduciary Rule?
For a thorough explanation of the background and applicability of the rule, read: “Consumer Protections for Retirement Investors – FAQs on Your Rights and Financial Advisers” prepared by the DOL in January 2017. To watch the DOL announce the rule, including speeches by U.S. Secretary of Labor Thomas E. Perez and Senator Elizabeth Warren, visit: https://youtu.be/uDe_T9IrAjU and https://youtu.be/jkpbLet9T8U.
What’s the status of the Fiduciary Rule as of August 2017?
Business owners and managers encounter contracts—varying in type, purpose, and complexity—daily. The finer points of how contracts are formed, what the essential provisions are, and when a breach excuses performance are legal questions; but, the answers vary depending on each fact-driven scenario. To help you spot the thorny issues, we highlighted key general principles below.
What are the elements of an enforceable contract?
Consideration—something of value must be exchanged (e.g., goods or services for money). See C.G. Schmidt, Inc. v. Permasteelisa N. Am., 825 F.3d 801, 805 (7th Cir. 2016).
What if party A and party B agree to make a deal but the specifics are TBD. Is that enforceable?
No, agreements to agree are not enforceable contracts in Wisconsin. For example, a general contractor for an eighteen-story office building in downtown Milwaukee solicited bids from subcontractors for a glass “curtainwall.” C.G. Schmidt, Inc. v. Permasteelisa N. Am., 825 F.3d 801, 805 (7th Cir. 2016). The contractor selected one subcontractor’s bid but never entered into an agreement. The subcontractor bailed on the project, after negotiating with the general contractor for more than one year, and the general contractor sued. The court considered the parties’ conduct and writings (including two letters of intent) to determine their intent—not to be bound by the subcontractor’s bid but to reach a final, binding agreement.
It depends. Some contracts must be in writing including, for example, contracts concerning real property (e.g., leases, offers to purchase, and mortgages; see Wis. Stat. § 706.02), settlement agreements (for actions pending in court; see Wis. Stat. § 807.05), contracts which cannot be performed within a year (see Wis. Stat. § 241.02(1)(a), and agreements to be liable for the debt or default of another person (see Wis. Stat. § 241,02(1)(b)). That said, many oral contracts are valid. But, enforceability requires that courts consider the parties’ conduct (including texts, emails, and other writings) and intent. See Associated Milk Producers, Inc. v. Meadow Gold Dairies, Inc., 27 F.3d 268, 271 (7th Cir. 1994) (“Even if the parties’ writings do not constitute a contract, however, the parties may nonetheless be found to have established a contract through their actions.”).
Are there limits on who may enter into a contract?
Yes, only competent adults (at least 18 years old) may enter into contracts.
Are there limits on activities for which people or entities may form contracts?
Yes, the activity required under the contract must be legal. For example, a contract to supply marijuana is illegal, and therefore, unenforceable in Wisconsin.
What clauses should be included in every contract?
Price, term, and the parties’ obligations are the basics of every contract. But, how they are defined and what other clauses are required varies depending on the type of contract (e.g., lease, sale of goods, service agreement), parties involved, and complexity of the transaction. As are result, there’s no one-size-fits-all approach to drafting or negotiating contracts.
Failing to complete construction project phases at agreed dates. See International Prod. Specialists Inc. v. Schwing Am. Inc., 580 F. 3d 587, 597-98 (7th Cir. 2009).
Converting a gym to a “women’s facility” when the lease required the tenant to operate an “athletic club.” See 44 Assocs. Ltd. P’ship v. Capital Fitness LLC, No. 2005AP3091, 2007 WL 704179 (Wis. Ct. App. Mar. 8, 2007).
Operating repeatedly outside a franchisee’s territory. See Manpower Inc. v. Mason, 405 F. Supp. 2d 959, 970-73 (E.D. Wis. 2005).
What is the “right to cure” a breach of contract? How can a breach be cured?
When statutes don’t provide the right to cure, contracts may define them. Courts are apt to apply well-defined cure provisions and contracting parties are wise to define terms clearly, rather than leaving their contract open to a court’s interpretation.

References: v. 
 v. 
 § 706
 § 807
 § 241
 § 241
 v. 
 v. 
 v. 
 v.