Top 10 List of Suggested New Year’s Resolutions for New Hampshire Companies

Thomas W. Hildreth
Of Counsel, Corporate Department
Richard A. Samuels
Director, Corporate Department
March 1, 2006

Everything old is new again.

Thomas Friedman tells us in his recent The World is Flat: A Brief History of the 21st Century that the ground moving beneath our feet is not, as we had thought, round, but rather is flat. In Friedman’s “flat world” view, “stability is not going to be a feature” of the new global economy, and “the weak will fall further behind.” By comparison, rugged entrepreneurs will be empowered. New Hampshire is nothing if not a state of “rugged entrepreneurs.”

As one turbulent year draws to a close and another begins, we take this opportunity to offer our suggested list of 10 resolutions that New Hampshire companies in particular might consider for 2006. The theme of our list is “Think Globally, Act Locally.”

1. Inspect your vehicle. Corporations, limited liability companies, and partnerships, come in many shapes and sizes. Periodically evaluate the vehicle that you have chosen for your business enterprise. If you are not already doing business as an LLC, you might consider converting to an LLC form of business organization. It might be advantageous to develop a holding company/operating company structure, converting a parent/subsidiary structure into a sister company structure, or moving valuable assets – tangible or intangible – into legally separate and distinct entities. Review inter-company agreements among the members of a single family of business entities to ensure compliance with the arms-length standards of Internal Revenue Code regulations.

2. Renew your vows. Business partners are sometimes likened to parties in a marriage. Just like it is a good thing periodically to renew your marriage vows, so too should you periodically re-evaluate the relationships among owners of your business enterprise. Prepare a written agreement among owners if there is none. Review and update buy/sell and voting agreements or LLC provisions defining relationships among owners. Be certain that all substantial owners have estate plans. The last thing you need is a cloud cast over the ownership and control of your business enterprise.

3. Review your corporate governance – structure and practice. Be regular and disciplined in the conduct of annual meetings of shareholders and directors. Clean up your corporate record book and make certain that shares have been paid for and issued. Develop written internal management guidelines to reduce the risk that a parent will be liable for the acts of a subsidiary.

4. Check your SOX. The vast majority of business enterprises in New Hampshire are closely held, not public companies. Accordingly, the provisions of the Sarbanes-Oxley Act do not apply. However, it is increasingly the case that some principles of SOX are being adopted and applied by closely held enterprises. Compliance with SOX may enhance the attractiveness of your enterprise to public companies when they are evaluating acquisition targets. Evaluate internal financial controls, the responsibility of management for financial statements, how information flows to your board of directors, the responsibilities of board committees, and qualifications of directors.

5. Mind your business. In today’s knowledge and information based economy, your employees are increasingly your most valuable asset. Plan an internal audit of your personnel files to ensure compliance with state and federal wage and hour laws. Implement a harassment prevention training program for all employees and officers. Resolve to add at least one employee benefit that will make your business a better place to work. For example, consider partnering with a local high school and giving employees paid time to interact with your adopted school to ensure that the skills taught are relevant to your workplace needs. Hold periodic company-wide meetings to enhance employee knowledge and morale. Involve your employees in working with you on creative ways to keep health care insurance available at a reasonable cost.

6. Review your non-compete agreements. The enforceability of non-compete agreements is strictly a function of state law, and the law governing enforceability of non-compete agreements has been clarified and narrowed over time. Review and revise non-competition and non-disclosure agreements to account for developments in the law so as to protect valuable goodwill and customer relationships.

7. Are your data retention and destruction policies e-literate? An increasing number of state and federal courts have imposed adverse consequences on litigants who have failed to provide timely and complete access to information because the information was retained electronically without a great deal of order, organization or thought. Review your policies on data retention so that, should it be necessary, you can more easily respond in litigation to e-discovery requirements.

8. Strengthen relationships with third parties. We are all part of a world-wide web. Our place in the web is often determined by the strength of our connections with constituencies with whom we deal daily. Resolve to hire the best professional advisors that you can afford. Choose your vendors wisely, then treat them as part of your team. They will more than reward you with good service. Speak well of your competition; it only makes you look better.

9. IP. Every company in our knowledge economy should conduct regular audits of its IP development, handling and management practices. Confidentiality and non-disclosure agreements with prospective business partners, documentation of discoveries and inventions by researchers and engineers, how you protect your intellectual property, and licensing of your IP assets all require careful and disciplined attention and protection.

10. Think globally, act globally. A final suggestion is a slight variation on the theme of acting locally. There are two parts to this resolution. First, lobby our congressional delegation for rational employment-based immigration reform. Many of New Hampshire’s enterprises rely on foreign workers to fill key positions in their workplaces. In recent years, even as other international barriers to trade and commerce are falling , an undercurrent of restrictionist sentiments in our country has impaired the ability of U.S. companies to employ foreign workers. Second, resolve to examine and enhance your particular business ties with the so-called “BRIC” countries – Brazil, Russia, China and India. These four countries represent 41% of the world’s population and are increasingly prepared to perform our services and manufacture goods at much lower prices than we can. While many service sector and manufacturing jobs will move to these countries, they also represent rapidly growing emerging markets. We should all explore ways that we can interact with these economies while they are enjoying their tremendous growth.