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?

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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

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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 ColmerOsborne ClarkeThomas.Colmer@osborneclarke.com

T +44 20 7105 7276M +44 7887 691 541Thomas.Colmer@osborneclarke.comThomas.Colmer@osborneclarke.comclarke.com

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