03/04/2018
This week, I had an important victory in the Court of Appeals for the First District of Texas. The Court of Appeals issued an opinion interpreting Texas Business Organization Code 101.201 in our favor and reversing a jury verdict.
I represented two owners of several limited liability companies against someone claiming rights to profit distribution from the companies. The claimant showed that he had previously received profits from the companies, the parties had an oral agreement that he would receive profits, and the parties owned other companies for which they always split the profits. We argued that Section 101.201 requires that profits can only be distributed based on documentary evidence and claimant failed to show any documents that he was entitled to profits. The trial court and jury disagreed with out interpretation of Section 101.201 so a verdict was issued that the claimant is entitled to profits from the companies. We appealed. Now, a Texas Appeal Court reversed that verdict and agreed with our interpretation of Section 101.201, that profits can only be distributed based on documentary evidence. A great win for us and a great lesson for business owners in Texas and other states.
When forming or investing in a limited liability company or any entity, it is important to ensure that your contributions, investments, and rights to profits and ownership interested are properly documented. These documents must be made part of the company records so that your rights are preserved. Oral agreements or evidence that you always received profit distributions are not enough. You need documentary evidence. This is a very interesting case for any business owner. Below is link to the Court’s opinion.
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