What the Heck is a Tontine?

I love vocabulary words, so I subscribe to Merriam-Webster's Word of the Day.

May 26th's M-W Word of the Day was "tontine," which is defined as "a joint financial arrangement whereby the participants usually contribute equally to a prize that is awarded entirely to the participant who survives all the others."

When I read that definition, I couldn't help but think of The Simpsons' episode in which it was revealed that Abraham "Grampa" Simpson was part of a tontine arrangement with the other members of his World War II military squad, the Flying Hellfish.  Under the terms of the Flying Hellfish's tontine, the last surviving member would inherit all of the valuable paintings found by the squad during the war.  Grampa Simpson and Montgomery Burns were the last two surviving Flying Hellfish, so Mr. Burns ordered Grampa's assassination.

The M-W Word of the Day entry says that tontines have been banned because, as with Mr. Burns, "there was just too much temptation for unscrupulous investors to bump off their fellow subscribers."

Reading that assertion got me wondering if Texas has any laws against tontines.  Well, I have some bad news for the Flying Hellfish.  I was able to find at least one such provision.  Section 3.122 of Title 28 (Insurance) of the Texas Administrative Code provides as follows:

"Any life insurance policy which is a tontine policy or which contains a tontine provision will be disapproved. Provisions by which dividends during the participating period are not allocated or paid annually are prohibited as being within the tontine principle unless the policyholder acquires, on termination of the policy, a vested interest in the dividends which have accrued."

5th Annual TECH Fort Worth IMPACT Awards

Earlier this week I attended the 5th Annual TECH Fort Worth IMPACT Awards.  TECH Fort Worth is a Fort Worth based incubator and accelerator for inventors and entrepreneurs starting up the next great companies of North Texas.  Among other things, TECH Fort Worth helped establish the Cowtown Angels, an organization of local angel investors.  

As usual, Darlene Ryan, the Executive Director of TECH Fort Worth, and the rest of her team put on a terrific event.  The IMPACT Awards celebrate start-up and early stage North Texas companies who are hoping to impact people's lives in a positive way.  Three finalists for IMPACT Awards were chosen in three categories: (1) Energy and Environment, (2) Community, and (3) Health.  All of the finalists are (or hope to soon be) doing some pretty amazing things.  I was lucky enough to be seated at the same table as representatives of the winner of the Health category, Applied Regenerative Technologies (ART).  ART is developing a nerve implant design for restoring nerve function to nerves damaged by trauma.

Congratulations to ART and to all of the finalists!  The IMPACT Awards and the entrepreneurial spirit they celebrate are always an inspiration to me.          

Little Known Facts: Oldest Firm in Fort Worth

One of the neatest things about practicing law at Cantey Hanger LLP is our firm's history. The firm was founded by William Capps and Samuel Benton Cantey in 1882, making it the oldest law firm in Tarrant County and among the oldest law firms in the State of Texas.  The firm has at least one client that it has represented for over 100 years.

But Cantey Hanger is not the oldest business in Tarrant County.  According to the Fort Worth Business Press, Cantey Hanger ranks as the 5th oldest business in Tarrant County. The distinction as the county's oldest business belongs to Pendery's World of Chiles & Spices, which was founded in 1870.  Or should I say that Pendery's is Tarrant County's most seasoned firm?

Real Estate Leasing Essentials

I was in Roanoke earlier today speaking at Chamber University 2013 sponsored by the Northwest Metroport Chamber of Commerce.  Does that make me a professor?  If so, can I start wearing one of those sport coats with patches on the elbows?

My topic was "Real Estate Leasing Essentials," which included some tips for tenants in negotiating leases for office space or retail shopping center space.  Special thanks to Gene Popik and the rest of the Chamber team that put on a terrific event and really making me feel welcome.

Texas Adopts New UCC Financing Statement Forms

What could be more exciting than financing statement forms?

Well, probably a lot of things could be more exciting, but few could be more important to a secured lender in Texas.  As my readers probably know, a financing statement is filed with the Secretary of State's office to "perfect" a security interest.  The financing statement puts the world (including possible future security interest holders) on notice that the secured party holds a security interest in the debtor's assets identified in the financing statement.  

The Texas Secretary of State's office will accept the new form of UCC financing statement beginning July 1, 2013.  After a 30-day phase-in period during which the old form and the new form will be accepted, only the new forms be accepted beginning August 1, 2013.

You can read more about this topic and get a preview of the new forms at the Texas Secretary of State's website here.

Canadian Capital Markets

"Go West, young man!" - Horace Greeley

I can't tell you why a well-respected author like Mr. Greeley would speak like a member of the Village People.  But I can tell you that companies seeking to access the public equity markets should know about some of the exciting things going on at TSX Venture Exchange (TSXV), Canada's junior stock market.  The TSXV is home to over one third of the publicly traded oil and gas companies in the world.  Perhaps the new motto for energy companies should be "Go North, young man!"

Recently, I saw a great presentation on Canadian Capital Pool Companies (CPCs), which are traded on the TSXV .  Over 2,300 CPCs have been listed on the TSXV since the program began in 1987, including over 300 companies that have "graduated" to the Toronto Stock Exchange (TSX), Canada's senior stock market.  The way it works is that a CPC, a newly created corporate shell, gets listed on the TSXV, raises a relatively small amount of capital, and then merges with an operating company via a reverse merger.  Shares in the merged company can be publicly traded on the TSXV.  The merger is referred to as a "Qualifying Transaction," and must occur within 24 months of the CPC's listing.  Going public through the CPC process is much quicker and less costly than a traditional US initial public offering (IPO).  The company's shareholders still get the benefits of being publicly traded, such as liquidity for the company's founders.  And the company typically gets a more attractive valuation than it would in a private placement.

As of August 2012, former CPC's represented over $64 billion in market capitalization. Since 2007, over 400 CPCs have gone public through such reverse mergers, and such former CPCs have over $12 billion in market value.

Although companies in any industry can merge with a CPC, approximately 50% of the former CPC's listed on the TSXV are oil and gas or mining companies.

The Super Bowl of Corporate-Friendly Law

Well, Super Bowl XLVII (that's 47 to you and me) is now in the books, with Baltimore's 34-31 win over San Francisco.  This was an especially good Super Bowl for story lines, including the Brothers Harbaugh, Beyonce's singing/syncing, the Blackout, the comeback, the goalline stand, the commercials, Ray Lewis, deer antler spray, the Pistol formation, post-Katrina New Orleans, and everything else.  But what I found most interesting about the game was the lack of major college pedigree from the two starting quarterbacks.  Baltimore's Joe Flacco played at the University of Delaware Fightin' Blue Hens.  San Francisco's Colin Kaepernick played for the University of Nevada Wolf Pack.

Besides being the breeding ground for two of the top young quarterbacks in pro football, Delaware and Nevada are also two of the most corporation-friendly states in the country.  Delaware corporate law is the gold standard for corporate law in the country.  Nevada is quickly rising as a popular place to incorporate based upon, among other factors, its lack of franchise tax or corporate income tax.

Delaware and Nevada.  Quarterbacks and Corporations.  Hmmmm.