Raleigh Business Attorneys & Lawyers

Updated November 16, 2020:

What Is a Clawback Clause?

A clawback clause gives investors of a brand-new company a chance to reclaim money or stock options already given to a partner or employee. Clawback clauses may also be found in the limited partnership agreements of private equity or venture capital funds.

If general partners or employees of a startup have signed a contract that includes a clawback clause, they could be forced to pay back some of their salary, benefits, and options in certain situations. This type of clause can protect limited partners or investors, letting them take back payments and equity if an employee or part

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Updated July 8, 2020:

What is a Special Purpose Vehicle?

A special purpose vehicle (SPV) is a subsidiary of a company which is protected from the parent company's financial risk. It is a legal entity created for a limited business acquisition or transaction, or it can be used as a funding structure. It is sometimes called a special purpose entity (SPE).

An SPV has assets, liabilities, and a legal status outside of the obligations of the parent company. The primary purpose of an SPV is to carry out a specific business activity outside of the parent company, therein protecting the parent company from risks such as bankruptcy and insolvency issues.

Why is a Special Purpose Vehicle Important?

SPVs are formed as limited partnerships, trusts,

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Poison Pill: What Is It?

A poison pill is a defense tactic companies use to deter or prevent hostile takeovers. These "shareholders rights plans" often threaten to dilute the price of stock enough to give the target company time to find alternative bids. It creates a cost that the purchasing company will have to pay after they've taken over. It also dilutes the value of the acquiring company's stock, to make taking over less appealing.

One company tries to wage a hostile takeover of another company by buying a large percentage of those shares. The company being taken over is called the target. The company or wealthy individual trying to take over is often called a corporate raider. The term poison pill does not refer to the target company harming their own interests. Instead, they're harming the corporate raider's interests.

Typically, corporate raiders try to increase a company's stock price when they acquire the company because

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Updated November 10, 2020:

What are Authorized Shares?

Authorized shares are the number of stock shares a company may issue to investors or employees at the time they incorporate and stock shares that the company board of directors may issue later as specified in the Articles of Incorporation.

Why Is Getting the Number of Authorized Shares Right Important?

Authorized shares can be issued when a company asks for financing. They may also be issued as a benefit for key employees. Usually, the number of shares that are authorized is much more than what is actually needed. This is to allow the company to issue stocks in the future when needed (as employee perks or perhaps as a secondary offering to raise more money). A company may refrain from issuing all of its authorized shares

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