For the past several weeks, our colleagues at Technology Law Source have been working hard to keep readers apprised of developments related to The Internet Corporation for Assigned Names and Numbers’ new generic top-level domain (gTLD) program. This program, which is essentially redefining the face of the Internet, is likely to impact any business — or, indeed, any entity — with a web presence. If you haven’t been able to keep up with the hundreds of gTLDs already delegated this year, download this hot-off-the-press e-book: Protecting Your Brand in a New gTLD World.
You also may want to subscribe to Technology Law Source (use the “Subscribe by email” prompt in the left column of the site) to receive weekly updates about the evolution of the gTLD program and the dot-anythings launching each month.
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Bankers and other financial institution executives may find it of interest that the Ohio Supreme Court recently granted a motion for reconsideration in a widely-reported, much-criticized decision concerning the enforcement of non-competition agreements, a subject that is almost always of interest.
Essentially, in the first case the Court reasoned that a successor to a corporate merger could not enforce a contract that pre-existed the merger. Such reasoning came as a surprise to many observers. The new decision is Acordia of Ohio, L.L.C. v. Fishel, 2012-Ohio-4648. A summary of the Court’s decision can be found here.
The Court now stated that it had previously – and erroneously – mis-read Ohio precedent regarding the legal effect of a corporate merger.
Here’s an excerpt:
"Upon further consideration, we now recognize that the lead opinion’s reading of Morris [v. Investors Life Insurance Co.] was incomplete. While Morris does state that the absorbed company ceases to exist as a separate business entity, the opinion does not state that the absorbed company is completely erased from existence. Instead, the absorbed company becomes a part of the resulting company following merger. The merged company has the ability to enforce noncompete agreements as if the resulting company had stepped into the shoes of the absorbed company. It follows that omission of any ‘successors or assigns" language in the employees’ noncompete agreements in this case does not prevent the L.L.C. from enforcing the noncompete agreements.
While we now hold that the L.L.C. may enforce the noncompete
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Both Ohio corporations and Ohio LLCs are permitted (but not required) to enter into indemnity agreements with their officers, directors, managers and employees. But when forming an Ohio corporation or Ohio LLC, entities should carefully consider the differing mandatory indemnity obligations that also apply to each type of organization.
As we noted in a previous post, the Ohio Supreme Court recently stated in Miller v. Miller that even without an indemnity agreement, Ohio corporations have certain mandatory responsibilities to pay directors’ litigation expenses (provided that a director first submits an "undertaking" to the corporation) under Ohio Revised Code §1701.13(E)(5)(a).
Mandatory indemnity requirements for Ohio LLCs are quite different. Ohio Revised Code §1705.32(C) states that to the extent that a "manager, officer, employee or agent" of a limited liability company has been successful on the merits or otherwise in defense of any action, suit or proceeding related to their status as a manager, officer, employee or agent, such person "shall" be indemnified against expenses that were actually and reasonably incurred.
This statute does not allow an Ohio LLC to avoid the indemnity by making a statement in its articles of organization or operating agreement. The LLC statute also applies to managers, officers, employees and agents – the Ohio corporate statute described above applies only to directors. In those regards, an Ohio LLC’s mandatory indemnity requirements may seem more burdensome (from the LLC’s perspective) than the indemnity requirements applicable to an Ohio corporation.
The circumstances in which an Ohio LLC would have to pay litigation expenses …
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