Corporate venturing
Published on 15th Nov 2018
Larger companies are increasingly looking at equity investment as a way of partnering with and learning from disruptive, fast-growth start-ups. In this session, we looked at some of the key terms and legal considerations when making corporate venture capital investments.
Share rights
What are the typical rights attaching to a corporate investor's shares?
What are the rights of the other shareholders?
We focussed on rights to income, capital and voting, as well as pre-emption, transfer, "drag along" "tag along", and "co-sale" rights.
Board governance
What rights do corporate investors, as well as founders and other shareholders, have to appoint directors or nominate observers to the board?
Have you considered board composition, quorum and directors' conflicts?
Information rights
What information about the company and its business is an investor entitled to?
What are the reporting obligations, and what are the confidentiality issues around information sharing?
Consent matters
Are there any company actions which will require the consent of the corporate investor or its appointed representative director in the future?
How are those rights shared with other investors?
What are the typical reserved matters, and what about the specific veto rights often sought by corporate venturers?
Commercial arrangements
What are some of the challenges of implementing a commercial arrangement with a smaller business at the same time as an investment?
Exits
What are the issues relating to an eventual sale of the company, from "paths to control" to blocking rights?
