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Tech Start Ups – some legal thoughts
27 May 2014
osborneclarke.com
Tech start up funding considerations
• LLP – taxed transparent partnership (cf. PAYE, NIC), 2 (designated)
members, limited liability, no capital maintenance, no formal
constitution/disclosure at CH
• VDR – organisation, eye on ball vs prize
• Equity/debt – convertible? security? redeemable? conversion?
• Liquidation preference – sale/exit, ?x, catch up? cap?
• Anti-dilution – full/weighted average? pay to play?
• Exit – intentions?
2
osborneclarke.com
Tech start up funding considerations
• Warranties, disclosure, limitations
• Board – right to appoint? observer? growth? chair's casting vote?
quorum frustration? committees e.g remcom? indemnification, D&O
• Information – who? what? frequency?
• Business – what? budget/business plan? name? IP?
• Negative and Positive covenants – Insurance? Auditor? compliance
generally
• Consent rights – threshold? board/investor? share capital,
constitution, funding, M&A, indebtedness, encumbrances, finance
leases, guarantees, capex (growth de mimimis?), key staff, non-
ordinary course and related party transactions
3
osborneclarke.com
Tech start up funding considerations
• Restrictive covenants – who? what? competition, solicitation
(suppliers, customers, staff), confidential information, duration?
• Options – tax, schemes, valuation, dilution, cap table
• Transfer - pre-emption (for all?), deeds of adherence, compulsory,
restrictions
• Good/Bad leavers – full value? vesting? death? family? Intra-group?
market value? valuation
• Drag-along - %?
• Tag-along - %?
• Dividends – policy? distributable reserves? (cumulative) preference?
• Other issues - registration rights, EIS/VCT clearance, etc.
4
Questions?
Thanks - Please get in touch
Thomas Colmer
Osborne Clarke
Thomas.Colmer@osborneclarke.com
T +44 20 7105 7276
M +44 7887 691 541
Thomas.Colmer@osborneclarke.com
Thomas.Colmer@osborneclarke.com
clarke.com
[insert photo here]
Height = 5.39cm
Width = 5.81cm
Questions?
Thanks - Please get in touch
Thomas Colmer
Osborne Clarke
Thomas.Colmer@osborneclarke.com
T +44 20 7105 7276
M +44 7887 691 541
Thomas.Colmer@osborneclarke.com
Thomas.Colmer@osborneclarke.com
clarke.com
[insert photo here]
Height = 5.39cm
Width = 5.81cm

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Tech start ups – some legal thoughts by thomas colmer at guru program spring 2014

  • 1. Tech Start Ups – some legal thoughts 27 May 2014
  • 2. osborneclarke.com Tech start up funding considerations • LLP – taxed transparent partnership (cf. PAYE, NIC), 2 (designated) members, limited liability, no capital maintenance, no formal constitution/disclosure at CH • VDR – organisation, eye on ball vs prize • Equity/debt – convertible? security? redeemable? conversion? • Liquidation preference – sale/exit, ?x, catch up? cap? • Anti-dilution – full/weighted average? pay to play? • Exit – intentions? 2
  • 3. osborneclarke.com Tech start up funding considerations • Warranties, disclosure, limitations • Board – right to appoint? observer? growth? chair's casting vote? quorum frustration? committees e.g remcom? indemnification, D&O • Information – who? what? frequency? • Business – what? budget/business plan? name? IP? • Negative and Positive covenants – Insurance? Auditor? compliance generally • Consent rights – threshold? board/investor? share capital, constitution, funding, M&A, indebtedness, encumbrances, finance leases, guarantees, capex (growth de mimimis?), key staff, non- ordinary course and related party transactions 3
  • 4. osborneclarke.com Tech start up funding considerations • Restrictive covenants – who? what? competition, solicitation (suppliers, customers, staff), confidential information, duration? • Options – tax, schemes, valuation, dilution, cap table • Transfer - pre-emption (for all?), deeds of adherence, compulsory, restrictions • Good/Bad leavers – full value? vesting? death? family? Intra-group? market value? valuation • Drag-along - %? • Tag-along - %? • Dividends – policy? distributable reserves? (cumulative) preference? • Other issues - registration rights, EIS/VCT clearance, etc. 4
  • 5. Questions? Thanks - Please get in touch Thomas Colmer Osborne Clarke Thomas.Colmer@osborneclarke.com T +44 20 7105 7276 M +44 7887 691 541 Thomas.Colmer@osborneclarke.com Thomas.Colmer@osborneclarke.com clarke.com [insert photo here] Height = 5.39cm Width = 5.81cm
  • 6. Questions? Thanks - Please get in touch Thomas Colmer Osborne Clarke Thomas.Colmer@osborneclarke.com T +44 20 7105 7276 M +44 7887 691 541 Thomas.Colmer@osborneclarke.com Thomas.Colmer@osborneclarke.com clarke.com [insert photo here] Height = 5.39cm Width = 5.81cm