Virgin Islands Law Blog

Virgin Islands Law Blog

U.S. Virgin Islands law & politics

Key Legal Issues to Consider in a Merger or Acquisition in US Virgin Islands

Posted in Corporate & Financial Services

3000884104_714507a1a4_oMerger and acquisition transactions can be quite complicated and require both the acquiring and target companies to address the following issues in detail to avoid challenges later on:

1)      The structure of the deal. When arranging a stock purchase, asset sale or merger, it’s important to consider the transferability of liability, which is transferred to the acquiring company in a stock purchase but designated between the companies in an asset sale. A pre-closing consent to assignment may have to be obtained, and stockholder approval may be necessary. The deal may also be structured to avoid tax consequences.

2)      Financing the deal. Although cash is a convenient and assuring option for the target company, it may affect the acquiring company’s debt rating or capital structure. The other financing option is equity, which offers more flexibility all around.

3)      Working capital adjustments. A working capital adjustment will probably have to be made to ensure the business can continue to fulfill its requirements and protect the acquiring company from target initiating, increased debt collection, delayed inventory acquisition or selling inventory to make payments.

4)      Contingencies to paying the purchase price. If an escrow is included, the terms should be carefully defined. An earn-out may be needed to moderate the gap between the valuation of the acquiring and target companies.

5)      Representations and warranties. It is imperative for the target company to review the acquirer’s representations, warranties and disclosure schedules to ensure there are no breaches of authority, capitalization, compliance with law, employment, ERISA, financial statements, intellectual property, material contracts, tax and other matters.

6)      Caps to target indemnification. The provisions of target indemnification should include minimum claim amounts required for the acquirer to seek indemnification, any caps at the escrow or other level and any exceptions to the caps, including breaches of fundamental representations like tax or intellectual property.

7)      Stockholder liability. Regarding indemnification, the liability of the target company’s stockholders has to be determined as either joint (in which the individual stockholders are liable for 100 percent of future damages) or several (in which individual stockholders are only liable for their proportion of contribution to the damages).

8)      Conditions of closing. For the companies to close the transaction, a list of closing conditions should include the absence of litigation, delivery of the target’s legal opinion, the stockholder voting threshold for approval, appropriate board removal and the absence of unfavorable material change in the target’s conditions.

9)      Review of long-term lead items. The companies should determine whether a Hart-Scott-Rodino filing is required and whether its filing will be delayed. They should also figure out how any necessary third-party notices or consents will be made.

10)  Covenants against competing and solicitation. The selling shareholders must draw a covenant not to compete against or solicit clients from the target and acquiring companies for a designated period of time.

If these considerations are carefully evaluated and followed, a merger or acquisition should be able to move along efficiently and easily. Working with a skilled attorney can provide additional benefit to facilitate the transaction.

BoltNagi is a respected and established business law firm serving companies and organizations throughout the U.S. Virgin Islands. 

Key Factors When Setting Up Visitation, Time-Sharing Arrangements

Posted in Family Law & Children's Issues

father and childThe process of adjusting to divorce can be challenging enough for children without factoring in the difficulty of adapting to different living arrangements and new locations. It’s important to set up a consistent visitation or time-sharing schedule they can rely on and get comfortable with as quickly as possible.

The following are some of the key factors to consider when drawing up your new time-sharing agreement:

1)      Your legal situation. You’ll need to complete basic legal forms and, depending on your divorce case, may need to establish a permanent visitation or time-sharing schedule in court. In some cases, a paternity test may even be needed to establish parental rights.

2)      Children’s ages. Children ages six to 10 may do best with frequent visitations with each parent throughout the week, but younger children may need more stability in their locations without extending their stays to more than a week. Infants and toddlers should only be subjected to time-sharing for a few hours at a time, while you may need to factor in time spent with peers for pre-adolescents and teens.

3)      The importance of parenting time. Your children need parenting from both parents, so don’t punish a parent who is tardy for visitation or behind on child support parents by withholding visitation rights. On the other hand, do enforce rules regarding lateness, as it’s not healthy for children to be waiting on a late parent consistently.

4)      Open communication. Don’t cut your children of from communication with their other parent during your time with them. Allowing them to call, text or write their other parent during appropriate times is beneficial for the parent-child relationship in general, and teaches them a good model of communication.

5)      Your level of conflict. If you and your ex-spouse are experiencing a significant level of conflict with no end in sight, try to maintain consistency for your children by reducing both the length of each time-sharing period and the number of transitions between locations. Time-sharing may even need to be held at a neutral location. If you are on good terms, however, you may be able to set up an open, flexible time-sharing arrangement.

6)      Their safety. Consider whether your children’s visits with their other parents need to be supervised, whether they should take place at a neutral location, whether the other parent should be allowed to transport the children anywhere and whether the children or their other parent have any medical considerations. Also avoid having children make a long commute, asking the other parent to come to them instead.

Focusing on what is best for your children, rather than what is most convenient for you, is the best way to ensure they adjust quickly and well to their new lifestyles.

BoltNagi is a respected and well-established family law firm serving clients throughout the U.S. Virgin Islands.

What You Need to Know About the US Virgin Islands’ Economic Development Program

Posted in Corporate & Financial Services

IMG_0004The Virgin Islands Economic Development Authority (VIEDA) is comprised of five main branches, each dedicated to encouraging growth in specific areas of the economy. These include the Government Development Bank, the Industrial Park Development Corporation, the Small Business Development Agency, the Enterprise Zone program and the Economic Development Commission.

These branches help the U.S. Virgin Islands grow, cultivating a world-class business sector rich in diversity and opportunity, and one that capitalizes on the various economic resources offered by the territory. This helps to conserve capital and job opportunities for existing residents.

In particular, the Economic Development Commission (EDC) is a cornerstone of the business economy in the U.S. Virgin Islands. The EDC program offers significant tax incentives for qualifying businesses, such as outsourcing companies, pharmaceutical companies, high-technology assembly plants and global manufacturers. With these incentives, businesses find that expanding or relocating to the territory is a uniquely viable option. These opportunities and benefits include:

  • Up to 100 percent exemption on business property tax
  • Up to 100 percent exemption on excise tax payments
  • Up to 100 percent exemption on gross receipt taxes
  • Up to 90 percent reduction in corporate income taxes
  • Up to 90 percent reduction in personal income taxes

In addition, customs duty tax may be reduced from the typical 6 percent down to only 1 percent. The EDC program also reduces the taxes on royalty income generated by the sales of software developed in the territory to non-U.S. patrons.

There are also significant benefits for investors in the U.S. Virgin Islands, ranging from convenient services to financially appealing opportunities. Investors may take advantage of the following:

  • Duty- and quota-free exporting of locally-made goods into the U.S.
  • Protection of U.S. courts and currency
  • Convenient air transport between the U.S. Virgin Islands and the U.S., Europe, South America and other Caribbean Islands
  • “Made in the USA” labeling for products
  • Cutting-edge telecommunications
  • Shipping opportunities
  • Desirable rental space
  • Immigration opportunities
  • Business-friendly environment
  • Convenient freight carriage on both U.S. and foreign flag vessels between U.S. ports and the US Virgin Islands

Since the inception of the EDC, new investors have realized both the human and economic potential that lies in the Territory. The infrastructure already in place offers prime rental space, an educated workforce, U.S. protection and unparalleled tax incentives, helping the U.S. Virgin Islands establish capital and provide great new opportunities to entrepreneurs.

BoltNagi is a widely respected and well-established business and corporate law firm serving clients throughout the U.S. Virgin Islands. 

Officials Continue to Discuss Unified Court System

Posted in Government Relations

Photo courtesy of flickr/Brian Turner

The U.S. Virgin Islands Supreme Court and Superior Court remain locked in a debate over the authority the Supreme Court would be allotted if the two systems merged, the courts’ heads said during budget testimonies in July before the 30th Legislature’s Committee on Finance.

Although both courts are in favor of merging into one entity, the question of authority has always been a contentious one. Over the last few years, the idea of merging the courts has become popular, as several years of budget cuts in combination with the Supreme Court’s recent assumption of the mantle of the court of final appeal has made the merger a convenient financial solution. During last year’s budget hearings, Virgin Islands Supreme Court Chief Justice Rhys Hodge publicly supported the merger, citing data from a study by the National Center for State Courts that suggested the Territory could save upwards of $2 million annually.

While the legislation for the merger was introduced at that point, it was held for amendment this February after conflicting testimonies from Chief Justice Hodge and the Superior Court Presiding Justice Michael Dunston showed just how much the courts were in disagreement about allotments of both budget and power.

Both Hodge and Dunston testified that their courts desperately needed millions of dollars more than the budgets the legislation recommended by Governor John P. deJongh would give them, insisting that the courts could not function adequately on the current amounts. The Fiscal Year 2015 recommended budget from the Governor allotted the Superior Court $26.9 million from the General Fund, while the Superior Court requested $31.28 million for salaries, court appointed services, taxes, operating expenses, utility services and youth programs. For its part, the Supreme Court had requested $2.43 million more than the Governor’s recommended budget of $5.48 million, which would cover salaries, benefits, taxes, equipment, operating expenses, the Commission on Judicial Conduct and more.

Additionally, the courts were not in agreement about how much administrative authority each one would maintain after the merger. Hodge and Dunston have met several times to establish areas of agreement, but remain in conflict over what they called the basic philosophical issues about how each court should be managed and where the heads would report. The Superior Court has proposed that its personnel should report to the Superior Court’s presiding judge, while the Supreme Court and the judiciary overall should report directly to the Supreme Court. The Supreme Court, however, stands firm on its proposal that it should supervise the entire court system, unifying both courts and essentially rendering the presiding judge’s position obsolete or merely symbolic.

No votes were taken during the budget hearing, but all involved are hopeful that the courts will reach a middle ground soon.

BoltNagi is an established and well-respected government relations law firm serving individuals, businesses and organizations throughout the U.S. Virgin Islands.

US Virgin Island Residents to Vote on Legalization of Medical Marijuana

Posted in Community Affairs

medical marijuanaIt appears that citizens of the U.S. Virgin Islands will finally get their chance to vote on whether or not the Territory should legalize medical marijuana this November.

Senator Terrence Nelson has sponsored a measure that, if it appears on the November general election ballot, would allow voters to give a simple yes or no answer to the question of whether the Legislature should allow for the licensing and regulation of medical marijuana cultivators, distribution centers, caregivers and patients.

For the Legislature to move forward with enacting this legislation, however, not only do the majority of voters on the issue have to vote yes, but the general majority of voters casting ballots in November also have to choose to vote on that specific referendum measure. Many senators expressed strong support of the bill and of the use of medical marijuana in general, and intend to increase efforts to educate the voting public on the medicinal value of marijuana.

Promoting economic development

The approval of this measure is the first time the Legislature of the Virgin Islands has supported a motion to reform marijuana laws by lessening restrictions. Last year, Senator Nelson proposed a bill to reduce penalties for marijuana violations, as well as a referendum on legalizing marijuana. This referendum actually focused on marijuana as an industry booster for the territory rather than as a recreational drug, and garnered support from both local medical practitioners and individuals with serious illnesses who use marijuana for relief from symptoms. These individuals cited studies with data proving the usefulness of marijuana in relieving nausea, pain and other chronic symptoms.

The Bureau of Economic Research was not ready to support the suggestion that the legalization of medical marijuana would boost the U.S. Virgin Islands’ economy, testifying that an economic analysis would be necessary. However, there was a possibility that marijuana legalization could interfere with rum production, one of the Territory’s main industries, although not with local revenues from rum sales.

Proponents have pointed out that legalizing medical marijuana in the U.S. Virgin Islands would dramatically increase the amount of visitors seeking its medicinal properties, boosting hotel rental rates, local cuisine consumption and other tourism dollars.

By adding the measure to the November ballot, the U.S. Virgin Islands is joining the 35 states and the District of Columbia that currently have bills under consideration related to the reformation of marijuana laws to approve and regulate medical marijuana use.

BoltNagi is a widely respected and well-established government relations law firm serving clients throughout the U.S. Virgin Islands.

Dram Shop Liability: A Growing Concern for Hotels, Restaurants

Posted in Litigation

pool drinkingAlong with all states, the U.S. Virgin Islands has a “dram shop law,” which is designed to enforce the public liability of establishments that sell and serve alcoholic beverages. In recent years, the potential for liability has had local hotels, restaurants and bars concerned about the likelihood of being targeted with a lawsuit if a patron is in an accident while under the influence of alcohol, so the Territory has now added its name to the list of jurisdictions that have imposed a limit to the liquor liability enforceable throughout its dram shop law.

The U.S. Virgin Islands had never seen many of these dram shop cases in previous decades, but in the last few years, local law practices have begun noticing a growing such litigation. These cases typically stem from visitors to the Territory who have sustained or caused injuries after being served too much alcohol at an establishment.

To combat the rise of dram shop lawsuits in the Territory, many of which seemed to be unreasonable or even fraudulent in nature, Senate President Shawn-Michael Malone proposed legislation to curb dram shop liability. Governor John P. deJongh signed the bill, drafted to protect these establishments from frivolous lawsuits, into law last year.

The legislation prevents the individuals who sell and serve alcoholic beverages to patrons from being held liable for any accidents, damage or injuries they cause or sustain, except in cases in which the individuals served persons under the legal drinking age or those who appear to be addicted to alcohol. The new law is based on the language from Florida’s dram shop law.

Even if dram shop lawsuits are fraudulent and don’t produce legitimate evidence of damage, the expense of defense in such a case is very high, up to hundreds of thousands of dollars. This poses a significant threat to the Territory’s many small bars and restaurants. And without the new law, very few establishments would be safe from fraudulent liquor liability cases, as places like gas stations, convenience stores, merchants and even private homeowners could be held accountable for the actions of their patrons or guests who were drinking.

In the year since the law has gone into effect, local establishments have been able to breathe easier regarding selling and serving alcoholic beverages to their patrons. This appears to be a positive development for the tourism industry in the U.S. Virgin Islands.

BoltNagi is a widely respected and established civil litigation law firm serving clients throughout the U.S. Virgin Islands.

Experts Say Same-Sex Marriage On Its Way to USVI

Posted in Community Affairs

same sex wedding ceremonyBoltNagi Attorney Tom Bolt informed the U.S. Virgin Islands’ Finance Committee last month that the territory will most likely be seeing same-sex marriages soon, whether or not residents vote for it.

While presenting next year’s budget request for the V.I. Uniform Laws Commission, a branch dedicated to researching and promoting productive uniform state laws, Bolt said that he anticipates federal courts will order the territory to adopt same-sex marriages soon, even if it does not pass any legislation making these marriages legal.

USVI Senator Judi Buckley has already taken steps to ensure that the territory does vote on the issue, however. Her bill, drafted in support of same-sex marriages and submitted to the Senate in late May of this year, was in the legal counsel phase at the time of the budget hearing where Bolt spoke about the likelihood of same-sex marriage coming to the territory.

Currently, the U.S. Virgin Islands’ Code defines marriage as union between a man and a woman only, a definition that has a number of anti-homosexuality supporters throughout the territory.However, Buckley calls her bill “the marriage equality” bill, and the notion of equality has garnered an equal number of supporters who insist that the right to marriage is a basic human right — regardless of gender.

The bill, which might not make its way to the floor of the Senate by the time Buckley finishes her term in January, would replace the phrase “between a male and a female,” found in Title 16 of the USVI Code, with “between two persons.” Similar language replacements are being made around the United States, as more than a dozen states have recently enacted legislation that legalizes same-sex marriage.

Many of the changes to individual states’ measures regarding marriage laws have come about in response to the U.S. Supreme Court’s decision last year to strike down the federal Defense of Marriage Act on the grounds that marriage can be defined as a union between two people. Bolt referenced this monumental decision in his testimony for the V.I. Uniform Laws Commission, asserting that similar legislation would make its way to the territory — and soon. Even now, if a U.S. Virgin Islands family court denies two people a marriage license because of their genders, they have the opportunity to seek redress through the federal court system. And the national trend toward legalization suggests that even this barrier won’t remain for long.

BoltNagi PC is a well-established and widely respected family law firm serving individuals and families throughout the U.S. virgin islands.

Tips for Preparing for a Small Business Loan

Posted in Corporate & Financial Services

will work for foodRequesting a business loan for your small business, whether you’re starting a new one or expanding your existing business, may seem daunting. However, there are a few small steps you can take to ensure your success in obtaining that loan.

It’s important to understand that business loans are significantly more difficult to obtain than a car or home loan because the stakes — the success or failure of your business — are much higher. Whereas cars and houses are physical assets that the lender can repossess and sell fairly easily if it becomes necessary, a business poses a much bigger loss.

If your business fails to repay the loan by the due date, all the lender can do is grant further, temporary funding in the hopes that your business will reach the point of repayment soon, restructure the loan to lessen the demands of repayment or call in the loan or foreclose on the business — none of which particularly benefit the lender. Therefore, lenders will likely require you to meet specific criteria:

1)      Good credit history. A lender can only grant a loan to someone who appears to repay money on time, and the best way to determine if failure to repay is a possibility is to review your credit history and factor in various considerations. Generally, your credit history has to be extremely good to qualify for a business loan.

2)      Equity. You have to make a financial commitment to your venture as well, to prove to the lender that it’s in your best interest to pursue the success of your business and repay your loan in a timely manner.

3)      Clear business plan. You will have to present the lender with a clearly drawn, carefully researched business plan that comprehensively describes your business and its market, demonstrates awareness of its competition, lays out employment and management plans, accounts for how the loan will be used and offers supporting documents like financial statements and credit reports. You will also need to provide estimates of your business’s cash revenue, income, summarized expenses and balance sheet.

4)      Previous experience. The more experience you have in owning or managing the type of business for which you’re requesting the loan, the better. Lenders prefer you to have at least three years of experience to be certain you can manage the loan responsibly and run the business well.

5)      Collateral. In addition to providing equity, you usually must also pledge an asset of value — up to and even more than the loan principal — as security that the loan will be completely repaid, including interest. The lender will determine the value of collateral required depending on the amount of risk assumed and the amount of any loans already in progress. Borrowers often put up property, inventory, savings or stocks as collateral.

If you approach all five of these requirements clearly and thoughtfully, you can show your lender you are well prepared to manage a loan efficiently and successfully. For further guidance on this important issue, speak with an experienced lawyer.

BoltNagi is a well-established and widely respected corporate and business law firm serving clients throughout the U.S. Virgin Islands. 

Partition of Real Estate: What if One Owner Wants to Sell, But the Other Doesn’t?

Posted in Real Estate

White Beach Chairs In Virgin IslandsPartitioning real property (as opposed to personal, financial or intellectual property) is a fairly common process that occurs when a piece of real estate, such as a building, an estate or a parcel of land, has multiple owners who no longer wish to have co-ownership. The property then has to be divided.

Often, not all of the co-owners are in agreement about what to do with the real estate. You may want to start a business in the building, build on the property or even sell it, while your co-owner does not. Usually, a property has multiple owners because it was inherited or because spouses purchased it together, so disputes like this are common. If the co-owner will not voluntarily divide the property, you have the option of bringing a partition action.

Partition options

There are two types of partitions. A “partition in kind,” or “actual partition,” separates each owner’s individual interests in the property, essentially dividing it into distinct portions, with each controlled only by one owner.

If a partition in kind is too difficult to carry out, the property may instead undergo a “partition by sale,” otherwise known as a partition by succession or licitation. In this case, the whole property is sold and its proceeds are divided among the owners.

The right to partition

Your right to partition is considered an absolute right, one that can only be limited by a provision in a will, a written waiver or the law. Even if you’ve been in a co-ownership for years, you can exercise your right to partition at any time. Courts are generally in favor of partitions and grant them willingly.

Preventing partitions

There are some situations in which you can take certain measures to avoid partition actions for a period of time. If the co-tenant agrees not to partition, particularly in writing, they may be prevented from invoking the right to partition temporarily. And if the co-tenant signed a non-partition agreement when obtaining the title to the property, that person will be held to those terms. However, a court usually will not enforce an agreement that permanently prevents the right to partition or that prevents it for an amount of time deemed to be unreasonable.

Partition acts are generally very complicated and require the involvement of the court to settle for a solution in the co-owners’ best interests. If you’re dealing with this issues, consult a skilled real estate attorney.

BoltNagi is a widely respected and well-established real estate law firm serving businesses and investors throughout the U.S. Virgin Islands.  

How to Determine if a Worker is an Independent Contractor or Employee

Posted in Labor & Employment

As a business owner, you may have to decide whether to hire independent contractors or regular employees for various positions. Both practices have their advantages and disadvantages, and are subject to very different rules when it comes to taxes.

Although you do not usually have to withhold or pay any partial taxes for independent contractors you hire, you do have to withhold income taxes, withhold and pay Medicare and Social Security taxes and pay unemployment taxes on wages for regular employees. With that in mind, it’s important to determine from the outset which category the individuals you’ve brought on are going to fall into to avoid tax issues later on.

The following information should help you determine the employment status of the people working for you:

Do you control their work?

Generally, if you have the right to direct and control when, where and how your workers go about or produce their work, no matter how much leeway you may allow them, they are considered employees. If the Internal Revenue Services tries to determine whether your workers are employees or independent contractors, the agency will examine the following specific categories of your control over them:

  • Behavioral control: This covers whether you have the right to direct how your workers perform their jobs, to control the times and locations they do it and to specify the protocol they are to follow through instructions or training.
  • Financial control: This category includes whatever control you may have over all of the business aspects of your workers’ performance, such as how and when they are paid, whether their expenses are reimbursed, who furnishes the necessary tools and supplies and what their profit, loss or investment opportunities are.
  • Type of relationship: This area takes into account how both you and your workers regard your relationship, examining the contracts or intents of both parties, the policy for termination or discharge, worker benefits (like vacation pay or insurance) and the intended continuance of the work.

Although these factors may vary depending on the business, it’s important to both consider and document all of these scenarios to make an accurate determination. If you’ve examined the evidence and are still unsure, you or your worker can file a worker status determination form with the IRS to obtain an official decision. For further guidance on this issue, consult an attorney experienced in labor law.

BoltNagi is a widely respected and well-established employment law firm serving businesses and organizations throughout the U.S. Virgin Islands.