Tuesday, January 15, 2019, 1:00-2:00pm
Many companies need additional capital to fund current operations and fuel growth.
When raising capital, these companies often look first to their existing investor base. These are often closely held companies where the existing ownership base wants to retain its control of the company. The company may build into its operative documents – shareholder agreements, operating agreements, even its articles of incorporation or organization – a plan whereby the company can “call” on existing investors to contribute additional capital, pro-rata or by some other formula.
There are variety of complex mechanisms for achieving these types of “capital calls” and adjusting the ownership interests and other rights of incumbent investors who do not contribute additional capital.
This program provides a practical guide to planning capital calls in closely held businesses, including how to adjust the financial and governance rights of the company’s owners.
- Advantages/disadvantages of requiring capital from existing investor base over time
- Forms of follow-on contributions – pro-rata and other structures
- Readjustment of stake in company when certain investors do not participate – dilution issues
- Voting, informational and related issues on the contribution of additional capital
- Obtaining additional capital from investors beyond the original
- Counseling clients about potential investor group disputes
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