Start-Up Entrepreneur Series: Preferred Stock

In the Start-Up Entrepreneur Series, I will be taking a deeper look into some of the most common questions early stage founders face in putting together and operating their new businesses.  

The Start-Up Entrepreneur Series will be published each Wednesday morning until conclusion. For more information, check out www.hoeglaw.com or drop Rick a line at rhoeg@hoeglaw.com.

***
Unless your new start-up is fully capitalized by its Founders, one of the first questions a new company must ask itself is “How are we going to fund this thing?”.

Last week we discussed the most common preliminary funding mechanism: “convertible debt“.  Today, we’ll talk a bit about the primary form in which institutions invest in start-ups: “preferred stock”.

Continue reading “Start-Up Entrepreneur Series: Preferred Stock”

Financing Term Sheet Deep Dive: Protective Provisions

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, we discussed one of the primary governance rights given by a Company to its Investors: board representation. This week, we talk about the other primary governance right: “protective provisions”.

Under most state laws, a corporation (or an LLC) cannot take certain significant actions without getting the approval (or “consent”) of the holders of the company’s equity. Generally, this right is held by a majority in interest of all such holders.

The term “protective provisions” is a fancy way of saying (in legalese) that in addition to getting majority approval, the Company must also get the approval of a set percentage of the Investor class in order to take certain of these actions.  In other words, the Investors are “protected” from the Company’s doing certain things without their having agreed.

Continue reading “Financing Term Sheet Deep Dive: Protective Provisions”

Start-Up Entrepreneur Series: Directors and Officers

In the Start-Up Entrepreneur Series, I will be taking a deeper look into some of the most common questions early stage founders face in putting together and operating their new businesses.  

The Start-Up Entrepreneur Series will be published each Wednesday morning until conclusion. For more information, check out www.hoeglaw.com or drop Rick a line at rhoeg@hoeglaw.com.

***

Last week, we talked about the various documents that make up the governing “law” of a corporation (or LLC).  This week, we’ll talk about the individuals that govern the actions of a corporation: the Board of Directors and Officers.

(Note that because of the inherent flexibility in the LLC structure, a discussion of an LLC’s management at a generalized level is not possible.  Know that an LLC can be organized as we discuss below (and that many do in order to emulate the more understood corporate form), but that it can also be organized in myriad other, distinct ways.)

Continue reading “Start-Up Entrepreneur Series: Directors and Officers”

Start-Up Entrepreneur Series: Governance Documents

In the Start-Up Entrepreneur Series, I will be taking a deeper look into some of the most common questions early stage founders face in putting together and operating their new businesses.  

Start-Up Entrepreneur will be published each Wednesday morning until conclusion. For more information, check out www.hoeglaw.com or drop Rick a line at rhoeg@hoeglaw.com.

***

The day-to-day operations of a business are dependent on many things: market trends, customer relations, vendor management, the CEOs mood.  But from a legal perspective, the operations of a company (whether a corporation or LLC) are governed at the highest level by the interactions of two or three primary sets of rules set forth in only two or three primary sets of documents.  While we’ll get into the details of what these rules can permit (or prohibit) later in the series, it is important, first, to get an overview of how they generally interact.

Continue reading “Start-Up Entrepreneur Series: Governance Documents”