In this article for Law360, Greenberg Traurig’s Bill Stark and Jeremy Wallace discuss a Texas Business Court decision holding that a four-year secured promissory note was not a “security” under the Texas Securities Act. They explain the court’s application of the Reves family-resemblance test, including its analysis of the parties’ motivations, distribution plan, investor expectations, and risk-reducing protections. They also provide issues to note for sophisticated parties, including clear loan terminology, collateral, guarantees, and other contractual safeguards that can help distinguish commercial loans from securities.
LINKS
Read “Tracking Texas: When A Promissory Note Is Not A Security.” (Subscription)