In sales of corporate stock or corporate assets, purchasers frequently will request an opinion from the attorney for the seller. Sellers sometimes request an opinion from counsel for a corporate buyer, especially in sales involving a purchase money security interest or the issuance of shares to a buyer from a seller. Legal opinions are often requested in financing transactions as well.
Generally, the party requiring the opinion letter wants the letter to speak to some or all of the following items:
– The entity represented by the attorney rendering the opinion was properly formed, organized, or authorized to do business under state law and is in good standing at the time of the transaction.
– The proposed transaction is permissible under the bylaws and is appropriately authorized in the minutes of the entity.
– The lawyer has examined the transactional documents and is of the opinion that they are legally sufficient to accomplish the purposes of the parties.
– The transaction does not violate applicable laws or violate, to the attorney’s knowledge, the agreements of the entity or any judgment applicable to the entity.
– The assets conveyed will pass free and clear of encumbrances.
– The contract of sale and purchase is legal, may be entered into legally by the represented party, and is enforceable by the other party.
Letters of this type have several legal consequences. First, an opinion letter may estop the represented party from denying the legal efficacy of the transaction. Second, any false or misleading information contained in the letter may give the party receiving the letter the right to set aside the transaction. A purchaser who has actual knowledge of sufficient facts to put him or her on inquiry, however, probably is not relieved from that inquiry by an attorney’s opinion.
Excerpt from the Florida Small Business Practice by the Florida Bar.