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Articles Posted in Business Sales and Acquisitions

What is a bulk sale clearance certificate, and how is a bulk sale clearance certificate related to a Pennsylvania real estate transaction?  In Pennsylvania, a bulk sale clearance certificate must be obtained in all transactions involving the sale of fifty-one or more percent of the assets of a business, including real estate.  Because it is common for property owners to create single purpose entities to own the real estate, bulk sale clearance certificates are required in many real estate transactions, since the real estate represents the sole asset (i.e., 100%) of the assets owned by such SPE.  A bulk sale clearance certificate from the Pennsylvania Department of Revenue verifies that a particular entity satisfied all tax obligations due to the Commonwealth of Pennsylvania, including taxes, interest, penalties, fees, charges and any other liabilities up to and including the date of transfer.

Moreover, under 69 P.S. § 529, every corporation, joint-stock association, limited partnership or company organized under the Commonwealth of Pennsylvania or any other state that engages in business in the Commonwealth of Pennsylvania which sells in bulk fifty-one percent or more of any stock of goods, wares or merchandise of any kind, fixtures, machinery, equipment, buildings, or real estate, shall give the Department of Revenue ten days’ notice of the sale, prior to the completion of the transfer of such property.

To provide proper notice and comport with Pennsylvania law, the seller must file form REV-181, the Application for Tax Clearance Certificate, with the Pennsylvania Department of Revenue and the Pennsylvania Department of Labor and Industry ten days before the closing of the sale. A copy of the agreement of sale and preliminary settlement statement should be included with the Application for Tax Clearance Certificate.  (Note, however, that the Department of Revenue often requests re-submission post-closing so that all closing information and interim tax returns through the date of closing may be submitted).  In addition, all such entities must file all state tax reports with the Department of Revenue to the date of the proposed closing on the transfer of property and pay all taxes and unemployment compensation contributions due to the Commonwealth of Pennsylvania through the date of closing. If all state tax reports have been filed and if all state taxes and unemployment compensation contributions are paid up to the date of the proposed transfer, the State issues a clearance certificate to the seller, which is then provided to the buyer.

In Edward Kang’s March 2016 civil litigation column in The Legal Intelligencer and the Pennsylvania Law Weekly, he writes on the issue of M&As and Attorney-Client Privilege of Selling Corporations.

Courts have long recognized that the attorney-client privilege extends to corporations, as in Upjohn v. United States, 449 U.S. 383 (1981). Because a corporation can act only through its agents, usually officers, a corporation’s attorney-client privilege generally applies to communications between the corporation’s authorized agents and counsel. As the U.S. Supreme Court explained in Upjohn, however, it is the corporation that holds the corporate attorney-client privilege, not individual officers.

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As a business owner, you want to make sure that your company successfully continues for generations to come. So, when you eventually retire or step down from your position, it is important to consider how you want to proceed with passing on your business to the next generation. Consider the following five tips.

1. Highlight your goals. Do you plan on passing your business down to your family, or do you prefer to transition to a buyer? Figure out your goals behind transitioning your business well before you intend to pass on your business. You should give yourself ample time to prepare for any obstacles along the way.

2. Create a clear strategy. Create a clear exit plan strategy as you move forward with the transition. Always be sure you have this plan set before you start so you do not run into confusion while transitioning. Consider the following to include in your strategy as you prepare:

It was announced on July 30, 2014 that Chicago Mercantile Exchange Group, Inc. (“CME”), the world’s largest future exchange operator, would purchase GFI Group, Inc. for a net price of $655 million.[1] GFI Group was targeted for its two units that would boost CME’s influence in the global market, Trayport and FENICS.[2]

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1. Define your goals. What is your ultimate goal in transitioning your business? Do you plan on funding your retirement through this transition? Is it to leave a legacy? The reason behind your desire to transition will determine how you proceed.

2. Plan & Implement Your Strategies. Create a clear plan as you move forward with the transition. Always be sure you have this plan set before you start so you do not run into confusion while transitioning. Consider the following to include in your strategy as you prepare:

a. Financial. If your goal is towards retirement, how will you be funding it? What will be your compensation as you leave the company? Be sure you highlight financial issues clearly and consult with the appropriate experts to make sure these issues are handled well.

Google is back in the news with another large sale M&A transaction, but this time, as the seller. In May of 2012, Google purchased Motorola for $12.5 billion in an effort to create a new means of producing hardware to operate the Android operating system.  Well this week, it seems Google is giving up, but wishing all the best to Lenova, a strong PC business growing in the smartphone market.  Google is selling its Motorola Mobility smartphone unit to Lenovo for $2.9 billion.  Continue reading ›

Many large corporations continue to flex their financial strength even in the modern economy, serving as an example to many smaller businesses that 2014 is the perfect time to expand.  Recently, mega giant Google bought smart home device designing…

A Market of Acquisitions and Mergers

Many large corporations continue to flex their financial strength even in the modern economy, serving as an example to many smaller businesses that 2014 is the perfect time to expand.  Continue reading ›
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