EU Corporate Guidelines
The first challenge and most important need is to know what the relevant EU corporate guidelines are, to know where they apply and to know how to find them. Unlike the United States, where corporate matters are generally covered by individual state law, in the European Union these matters have long attracted centralized legislation from Brussels, which affects the entire EU (now 25 countries, which in 2007 will be joined by Bulgaria and Romania). Norway and Switzerland (although not in the EU) often legislate regarding these matters much as EU member countries do and thus, for our purposes here, we can talk about 29 countries in Europe rather than the 25 that currently make up the EU.
Starting From Scratch
The number of new law firms formed by partners that have split off from existing firms is on the rise. As such, these partners, who may never have been involved in technology decisions at their previous firms, have to start from scratch in order to implement the computer systems, e-mail systems, financial and practice management software needed to conduct business.
Law Firm Performance 2004 ' Highlights
For the industry as a whole, the economic performance of law firms in 2004 was quite good. Indeed, given the overall state of the national economy and the dire early predictions of some pundits, the performance of the industry was remarkable. Much of this positive performance was, of course, attributable to the continuing strength of litigation practices as well as, to a lesser extent, bankruptcy and reorganization activity.
New Tax Requirements for Nonqualified Deferred Compensation
In addition to or in lieu of broad-based tax-qualified retirement plans, employers often provide select executives or groups of executives with nonqualified deferred compensation arrangements. These "arrangements" may be in the form of a plan, a written agreement or even a clause in an employment agreement. Much like a "401(k)" tax-qualified retirement plan, these arrangements typically provide for an advance written election by the executive to defer the receipt of otherwise payable future compensation. However, unlike tax-qualified retirement plans, which by law must generally preclude the distribution of benefits prior to an event such as death, disability, retirement or separation from service with the employer maintaining the plan, many nonqualified deferred compensation arrangements have provided for far greater flexibility as to early access to plan funds. To date, the tax law has permitted nonqualified deferred compensation, along with the attendant deferral of tax revenues for the government, on the theory that it provided a tax-favored mechanism for the accumulation of additional savings for retirement. The implementation of nonqualified deferred compensation arrangements providing for distributions upon certain types of arguably foreseeable "hardships" (eg, to pay for college) or in return for a "haircut" forfeiture, cut against the notion that the revenue deferral effect on the government is outweighed by the benefit of permitting the accumulation of additional retirement funds, as these arrangements provide benefits which may not be used for purposes of retirement.
SOX Lowers the Bar for Barring Directors and Officers
Banishment from the public company world -- through the enforcement of a D&O bar - used to be an extreme remedy for management misconduct. Now, the trend has turned, with Sarbanes-Oxley (SOX) and the current enforcement climate leading to a flood of requests for bars. In 2000, the SEC asked federal courts to impose 38 D&O bars, 7.5% of the cases initiated that year. In 2001, the SEC asked for 51 D&O bars, or 10.5%. In 2002, in the wake of corporate scandals that gave rise to Sarbanes-Oxley, the SEC requested 126 D&O bars, in 21% of initiated actions. In 2003, that number shot up to 170, in 25% of cases. As Stephen Cutler, the head of the SEC's Enforcement Division, recently explained, the SEC is "aggressively" seeking D&O bars "in expanded ways." Practitioners are now finding D&O bars to be a routine component of settling an SEC action.
Bankruptcy Lease Sales: Four Basic Rules to Play By
Bankruptcy presents a unique forum for a cash-strapped debtor to sell otherwise unassignable and unprofitable leases to third parties, for immediate cash, and free of liens, certain contract restrictions, certain transaction costs, and future liability. While the bankruptcy arena offers unique opportunities, it poses special risks. The primary players in a bankruptcy lease sale scenario are the debtor, the prospective buyers, and the landlord. A debtor's goal is getting as much value as fast as possible for its creditors. A prospective buyer wants to pay as little as possible, with sufficient due diligence, and have an unassailable sale with whatever lease modifications are necessary for it to remodel and reopen. A landlord's objective is timely lease compliance and a financially and operationally sound buyer. Each party can benefit from following these four basic rules of bankruptcy lease sales.
PCAOB Proves It Has Teeth
While some companies are unfamiliar with the Public Company Accounting Oversight Board (PCAOB), PCAOB has recently been making its presence known. PCAOB is a private-sector nonprofit corporation created by the Sarbanes-Oxley Act of 2002 (SOX), whose stated purpose is to "oversee the audit of public companies that are subject to the securities laws, and related matters, in order to protect the interests of investors ... " Section 101(a). Although some questioned whether PCAOB would ultimately have any real-world impact on accounting firms and the public issuers they audit, PCAOB has proven that it has the authority, ability and appetite to shape the heightened environment in which companies now operate following passage of SOX and its focus on restoring investor confidence in companies' financial reporting.
Tax and Retirement Planning
The 2004 American Jobs Creation Act (AJCA) creates several tax breaks for businesses and made some other significant changes. This article highlights the more prominent provisions of the AJCA that affect businesses and individual taxpayers generally, and that to some extent have specific impact on law firms and other professional service providers.
The IRS Office of Professional Responsibility
The Internal Revenue Service has recently ramped up compliance and enforcement efforts with budget increases and enhanced resources. A lesser-known component of this revitalized enforcement is the IRS Office of Professional Responsibility (OPR), which is charged with regulating professionals ' mostly lawyers and accountants ' who practice before the IRS. OPR enforces ethical rules that govern practice before the Service, commonly known as "Circular 230," and may sanction practitioners who violate those rules. Because OPR matters can interact with the criminal process in many respects, conscientious white- collar practitioners and corporate tax counsel should familiarize themselves with OPR and its power over tax professionals.
Differentiating Your Firm With Technology
Law firms were late adopters of information technology. Differentiating a firm with technology was easy in those days: The firm simply had to have technology. Of course, there's little evidence that clients cared much about their firms' technology in those days. <br>In contrast, some clients today will base their choice of law firms in part on the firms' technology.
