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Job Ain’t Over Til The Paperwork is Done
Every company leaves a paper trail. It’s either a happy trail leading to a land filled with milk and honey or a horror trail leading to an eventual potential death trap for a company. Which road is your company on? This white paper is the equivalent of the GPS system for corporate administration. It will set your destination more accurately and help you along in the journey. This invaluable piece covers which and how to’s of crafting or recrafting contracts, negotiations, proprietary information to be positioned for the disclosure process without giving up trade secrets, possible charter amendments, the all important minute book (what’s in and what’s out), third party endorsements (where they might be needed and why), cap records (how to create a foundation that is as dilution/disqualifying proof as practicable, conducting a rights analysis to limit downside exposure, overhang impact, environmental review and more. Prior to approaching the markets, your entire company may need to be gutted to ensure a proper trail is built-out without any pitfalls for liability. Do you really want to “leave home without it”? One of the primary reasons for incorporating is to limit the personal liability of the owners of the company. Most management teams recognize the potential pitfalls that lay ahead of corporations looking to go public which would otherwise exist without incorporating. However, without proper maintenance of the corporate structure and by proxy through record keeping, the protection that the shareholders sought by incorporating may very quickly evaporate. Courts across the country recognize a concept known as “piercing the corporate veil.1” This concept allows a creditor of the corporation to bring a claim directly against the shareholder(s) of a company where the corporate structure is not maintained. The courts have stated that the corporate entity will be disregarded where it is shown that, “the shareholders disregarded the corporate entity and made it a mere instrumentality for the transaction of their own affairs; [and] that there is such unity of interest and ownership that the separate personalities of the corporation and the owners no longer exist.” The stated goal for corporate recording keeping then is to create relatively down-the-middle documents that benefit both companies and investors by standardizing non-critical terms and conditions, providing a reasonable level of investor protection, maintaining company flexibility and, probably above all, streamlining the review process in the event of litigation. If successful, this process will reduce the time and cost of legal interruptions, allow parties to focus on high-level issues and trade-offs, and allocate limited legal budgets to key due diligence issues and higher value-added services from counsel. Moreover, companies would enjoy the most current set of best industry practices and be in a better position to avoid legal pitfalls. The result of the scrub work is a complete set of forms and record documents consisting of everything possible: term sheets from prior financings, certificate of incorporation, stock purchase agreements if any have been entered into, investors’ rights agreement if the company has been subject to same, a right of first refusal and co-sale agreement, again if applicable, a voting agreement if shareholders and management have agreed upon such, and assorted ancillary documents like insurance policies, banking statements, tax returns, etc. All annotations with alternative comments or prior formulations of critical provisions that were party of negotiations required to tailored specific incidences should be eliminated. “Rub-a-Dub-Dub, Three Men in a Tub” could be the motto of this aspect of going public! As you go through your files, you should intend that all your company’s paperwork will be made publicly available. Nothing you wouldn’t want paraded in front of a jury box should remain. In order to accomplish this task, you may want to utilize working subgroups initially drawn from the various teams who will eventually be responsible for maintaining and updating each document on an ongoing basis in an effort to ensure that each document reflects the true intent of your company. For example, your human relations folks should be responsible for all personnel information to... [continued...] Want to know more? Download the White Paper "Job Ain’t Over Til The Paperwork is Done" for just $29.95. |
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