Streamline the deal cycle in IS standard documents

How to create outlook signature

what are the common or standard legal documents that you'll find as part of an equity financing where we stated what are the standard Equity financing documents well let's start at the beginning investors are going to buy an interest in the startup Venture they're going to want a specific type of Interest that's generally preferred convertible participating stock now in order to accommodate this request the business is going to have to restate its Articles of Incorporation to authorize this type of ownership interest and generally they're also amend the bylaws in the process to accommodate specific Provisions applicable to this type of Interest so the Articles of Incorporation first will need to be amended and restated so that means redrafting the Articles of Incorporation next you got your term sheet the initial negotiation process has come up with numerous deal terms that you're going to want to memorialize well the term sheet by itself is not a binding document but it does memorialize the common understanding of the parties so when you move forward as part of the drafting of the stock purchase agreement then you have all the terms in place and some of the other ancillary documents that will include some of the provisions contained in the term sheet so this is a document that's generated the actual stock purchase agreement is going to contain a lot of the provisions in the term sheet particularly the valuation of the shares what the parties are paying for the shares and it will obligate the purchasing parties the investors to sign other agreements and be subject to the terms of the existing or restated bylaws and shareholders agreements that already govern the existing entity okay investor rights agreement this agreement contains the bulk of the investor protections that are negotiated and initially stated in the term sheet things like a liquidation preference Redemption rights oftentimes you'll include rights of first refusal and co-sale rights in there but oftentimes again this will be in a separate document you'll have information rights control rights specific designation of board seats observation rights if you will all of these our general Provisions that are negotiated early in the early in the deal negotiation process the investor rights agreement is where you memorialize these okay investment companies are regulated by the Investment Company act and to avoid regulation under that act and turn it into more of a venture capital investment company you need to have what's called a Rights Management letter or excuse me management rights letter and this letter is used to designate specific rights on behalf of the investors to take part in decision making and which designates certain decision-making authority to the Venture Capital company the investment company that is the company that's investing on behalf of the actual limited partners the investors so this makes certain that it exempts the Venture Capital company from certain extensive disclosure regulations that's required in that investment advisors Act next you have employment agreements oftentimes at this point you'll enter into employment agreements that contain Awards of stock options and other things to keep the existing Founders and managers obligated and motivated to be part of the company and the firm you wouldn't want a scenario where the executives of the startup seek funding receive funding pay themselves a salary and then leave the firm again that would honestly be unethical and would because it's looting the firm and just taking investor capital and leaving so employment agreements seek to bind the executives in the startup to continue working under conditions of equity granting to them over a period of time in the future so that the investors once again cannot be taken advantage of in this way writes a first refusal and co-cell agreements this is basically the rights of investors to sell their shares along with any current shareholders who seek to sell their shares or if they wish to sell their shares to Grant write a first refusal or write a first offer to these the startup itself to repurchase those shares if the investors wish to sell their shares to others so you got the co-sale which is the rights to sell along with anybody currently selling their share and then the right of first refusal the right of the firm to purchase those shares for any third-party Outsiders can voting agreements oftentimes investors will negotiate for themselves specific voting rights such as designation of a particular board seat for which they can vote or Superior voting rights where a single preferred share has multiple votes for particular board seat other voting rights might include specific Provisions for major decisions affecting the firm such as the issuance of new Equity or taking on of new partners or the hiring of new Executives that sort of thing so schedule of exemptions when the startup makes full disclosure to the investors as part of the diligence process generally they will outline specific things that have been disclosed that may otherwise not be obvious to third parties they want to make certain that they're memorializing anything that would be a material concern to investors so it can't later be claimed by investors that there was a lack of disclosure if there was some kind of internal dispute in that way so a schedule of exemptions is oftentimes attached to and included to the stock stock purchase agreement you'll seek a legal opinion from councils generally the legal opinion is limited to stating that the governance Affairs of the business are in order that is they meet with state law and other requirements uh under uh governance statutes there are a couple of federal statutes that apply towards um internal governance but mainly that everything is organized in ance with state law that General governance procedure has been followed and everything is in order to adequately transfer the ownership interest desired in by the investors consents in order to approve the issuance of shares to investors the board of directors have to approve it and then send that out for authorization to shareholders to shareholders have to consent to it you can do this through vote during a formal meeting or you can do it through unanimous consent in a startup usually the board is consists of the existing shareholders and the managers of the company so it's easier to do it as a unanimous consent document to the issuance of new shares you have the officer and secretary certificate this is her certificate or or a attestation by the officer that they have authority to act on behalf of the board of directors in carrying out some of these functions such as restating the Articles and actually Distributing uh these shares of stock in the company the the secretary's certificate is likewise an authorization that these Shares are valid that this was recorded during the meeting of the board of directors or shareholders or that there was a unanimous consent so it's an uh eye test station that things were carried out procedurally correctly by the corporate secretary who's in charge of keeping corporate records uh then confidential information and IP agreements if there's any intellectual property or any uh confidential information that was disclosed as part of the funding process or that it's going to bring in these intellectual for these forms of intellectual property into the company you have an agreement between the parties stating the existence of the intellectual property and effectuating once again uh the transfer of that into the company so this will be uh IP disclosure agreement and sometimes a transfer agreement to accompany it and then stock certificates not all startups actually issue physical stock certificates but they will sign an agreement authorizing them to if requested or if desired to actually issue the certificates but generally the ownership interest is simply recorded on the ledgers of the corporate secretary in that way so these are the standard documents there may be one or two other documents thrown in there as part of the equity financing process in any specific transaction where something specific to that transaction comes up but by and large these are the documents that you're going to see in most Equity funding transactions