Drafting and Negotiating Convertible Preferred Stock Provisions: Protecting Interests of Businesses and Investors

Structuring Liquidation and Distribution Preferences, Conversion Rights, Negative Control Rights, Anti-Dilution Protection, and Tax Provisions

Recording of a 90-minute CLE webinar with Q&A


Conducted on Thursday, May 8, 2014

Recorded event now available

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Program Materials

This CLE webinar will discuss the risks and benefits of convertible preferred stock for investors and companies in negotiating convertible preferred term sheets to fully capture the benefits of the investment. The panel will discuss drafting considerations for key terms including liquidation preferences, conversions, anti-dilution protection, and tax and accounting issues.

Description

Convertible preferred stock provides investors two key benefits: a liquidation preference over common stock if the company is sold or liquidates and the right to convert into common stock if the company’s value increases significantly.

The terms of the stock agreement will to some extent be influenced by the bargaining power between the company and the investors. During negotiation of the term sheet, there are key issues that investors carefully weigh and address to maximize the benefits of the investment.

Key stock provisions include liquidation preferences, conversions, anti-dilution protection, and tax and accounting considerations. Drafters of stock provisions must be precise and clear in setting forth rights, powers and preferences.

Listen as our authoritative panel of practitioners discusses investor risks and benefits of obtaining or issuing convertible preferred stock, best practices for negotiating convertible preferred term sheets, and drafting key terms including liquidation preferences, conversions, anti-dilution protection and tax and accounting considerations.

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Outline

  1. Liquidation and distribution preferences
  2. Conversion rights
  3. Negative control rights
  4. Anti-dilution protection
  5. Tax and accounting treatment

Benefits

The panel will review these and other key questions:

  • What are the benefits and risks for investors in obtaining convertible preferred stock?
  • What are the risks and benefits for companies issuing convertible preferred stock?
  • What terms or risks must investors carefully weigh and address when negotiating the term sheet?
  • What key considerations must counsel consider in drafting convertible stock provisions?

Following the speaker presentations, you'll have an opportunity to get answers to your specific questions during the interactive Q&A.

Faculty

Justin Bowen
Justin Bowen

Partner
Bowen Tax Law

Mr. Bowen is an experienced transactional tax attorney whose practice focuses exclusively on U.S. federal income tax...  |  Read More

Shawn Haghighi
Shawn Haghighi

Atty
Sklar Kirsh LLP

Mr. Haghighi has over a decade of experience as a corporate attorney in large international law firms and as in-house...  |  Read More

Stephen I. (Steve) Halper
Stephen I. (Steve) Halper

Of Counsel
Sklar Kirsh LLP

Mr. Halper has over 30 years of experience addressing the needs of entrepreneurs, emerging growth companies,...  |  Read More

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