Financing Term Sheet Deep Dive: Registration Rights

Whether you’ve only recently decided to seek out capital for your business or you’ve already received (or made) your first offer, the term sheet (or “letter of intent”) is an integral part of the process.  

In this series we’ll look to shed some light on the legal language contained in that term sheet by taking a “deep dive” into the most often used terms and how choices made in selecting those terms can affect both Company and Investor.  Check out an overview here.

Financing Term Sheet Deep Dive will be published each Monday morning until conclusion. For more information, check out www.hoeglaw.com or drop Rick a line at rhoeg@hoeglaw.com.

***

Last week when discussing redemption rights, I equated them to a sword hanging over the Company’s head.  That’s because the right of an Investor to redeem his or her investment is not usually actionable.  The Company simply isn’t likely to have the funds to pay back.  The key to the term is the “leverage” given to the Investors, not the right itself.

Today we discuss another Investor “leverage” term:  Registration Rights.

Continue reading “Financing Term Sheet Deep Dive: Registration Rights”

Financing Term Sheet Deep Dive: Redemption Rights

Whether you’ve only recently decided to seek out capital for your business or you’ve already received (or made) your first offer, the term sheet (or “letter of intent”) is an integral part of the process.  

In this series we’ll look to shed some light on the legal language contained in that term sheet by taking a “deep dive” into the most often used terms and how choices made in selecting those terms can affect both Company and Investor.  Check out an overview here.

Financing Term Sheet Deep Dive will be published each Monday morning until conclusion. For more information, check out www.hoeglaw.com or drop Rick a line at rhoeg@hoeglaw.com.

***

Earlier in this series when we initially discussed the concept of dividends, we equated the idea to that of lenders receiving interest payments on the “loan” they made to the company.  In that context, “Redemption Rights” are the rights held by a company’s investors to call that “loan”; to force the company to buy them out.

While redemption rights are rarely, if ever used by the Investors that hold them, like so many rights that we have discussed in this series (and will discuss in the future), they are important because they set the playing field for future discussions.

In other words, they establish leverage; the nature of which you can see indicated in the header image to this post.

Continue reading “Financing Term Sheet Deep Dive: Redemption Rights”

Financing Term Sheet Deep Dive: Anti-Dilution

Whether you’ve only recently decided to seek out capital for your business or you’ve already received (or made) your first offer, the term sheet (or “letter of intent”) is an integral part of the process.  

In this series we’ll look to shed some light on the legal language contained in that term sheet by taking a “deep dive” into the most often used terms and how choices made in selecting those terms can affect both Company and Investor.  Check out an overview here.

Financing Term Sheet Deep Dive will be published each Monday morning until conclusion. For more information, check out www.hoeglaw.com or drop Rick a line at rhoeg@hoeglaw.com.

***

Last week, in discussing the right of Investors to convert their preferred stock into common, we touched on the concept of “anti-dilution” provisions intended to alter the number of shares that the preferred stock might convert into.

Today, we take a deeper look at this complicated concept.

Continue reading “Financing Term Sheet Deep Dive: Anti-Dilution”