![]() Centralized offices for the entities and,ġ4. Corporate formalities were not observed ġ3. Some employees were compensated by more than one member of the group ġ2. Almost all of the business of the entities was given to them by the other entities ġ0. Some employees received salaries from more than one entity ĩ. There were common employees and at least one entity had no employees Ĩ. The income of the companies was largely dependent on collecting receivables from the other entities ħ. The entities were financed primarily through intercompany debt Ħ. There was “a tremendous amount of intercompany debt due to the lack of adequate initial capitalization” ĥ. The corporations entered into some transactions without economic justification and solely for the benefit of another related entity Ĥ. Two of the shareholders “dominated the affairs of all of the corporations” ģ. The same family members were the controlling shareholders of all of the corporations Ģ. The facts the court found important were:ġ. The court in Green ruled that several related insurance companies could be held liable for the debts and obligations of the others because the entities were operated as a single business enterprise. excessive fragmentation of a single enterprise into separate entities. unclear allocation of profits and losses between entities andġ8. undocumented transfers of funds between entities ġ7. services rendered by the employees of one entity on behalf of another entity ġ6. noncompliance with corporate formalities ġ3. one entity using the property of another entity as its own ġ1. receiving no business other than that given to it by its affiliated entities ġ0. one entity paying the salaries and other expenses or losses of another entity ĩ. one entity causing the incorporation or organization of another affiliated entity Ĩ. directors and officers of one entity act independently in the interest of that entity ħ. ![]() unified administrative control of entities with similar business functions Ĥ. companies with substantial identity of ownership or ownership sufficient to give actual working control Ģ. Champion Insurance Company, the court outlined a set of factors to be considered when determining whether several related entities constitute a single business enterprise:ġ. In those cases, the courts have imposed liability on the related entity and rejected the argument that the related entity is free from liability because it is a separately organized or incorporated entity. The SBE theory of liability has been applied in situations where one entity “is so organized and controlled as to make it merely an instrumentality or adjunct” of another entity. The SBE theory allows the court to disregard the corporate structure and treat all the entities as one, resulting in all entities being liable for a judgment against single entity. The primary purpose of that structure is to protect the assets of the other businesses in the event one of the businesses has financial difficulties or faces legal liability. In most cases where an investor owns multiple businesses, the various business interests will be separated into different LLCs or other entities. The Kelly Hart team was led by partner Drew Neal with assistance from partner Drew Neill and associate Mason Smith.Another important issue that small business owners should be aware of is the “single business enterprise” (SBE) theory. The company owns mineral and royalty interests in over 16 million gross acres in 28 states and in every major onshore basin in the continental United States, including ownership in more than 122,000 gross wells with over 46,000 wells in the Permian Basin. Kimbell Royalty Partners, LP is a leading, publicly traded mineral and royalty company based in Fort Worth, Texas. To view the press release in its entirety, click here. The acquisition is expected to close in late May 2023, subject to customary closing conditions. The mineral and royalty interests to be acquired are located in the Northern Midland Basin area of the Permian Basin, located in west Texas. ![]() Kelly Hart recently advised entities controlled by Kimbell Royalty Partners, LP on a definitive agreement for the $143 million (cash and stock) acquisition of mineral and royalty interests held by Corpus Christi-based MB Minerals, L.P.
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