Topic
Liquidation Preference
10 published works
Blog of Digital Law and New Technologies
What is liquidation preference and why does it matter in an investment round?
When a company closes an investment round, most of the attention usually goes to valuation, the percentage the investor receives, or the amount of capital coming into the business. However,…
Blog | White & Brief
How Secured Creditors Jump the Queue in Liquidation
By Tejashree
The liquidation waterfall under the Insolvency and Bankruptcy Code, 2016 (IBC) is one of its most deliberately engineered and commercially consequential provisions. Section 53 of the Code prescribes a strict…
China Law Insight
金杜遇见独角兽丨分钱利器清算优先权
By King & Wood
作者： 聂卫东 张涵钰 金杜律师事务所公司业务部 “金杜遇见独角兽”是我们新近推出的专栏，将定期发布跟“独角兽”相关的各种专业、前沿的观点述评与行业观察。继上期推出“网络游戏热点法律问题系列问答”后，本期我们推出“独角兽捕手修炼手册”——高度浓缩投资过程中的真正风险点，以及如何把握那些来之不易的投资机会。我们将全部采用清单形式，严格限制清单条数和字数，希望让你在最短时间内有最大收获。 1. 最实在的权利 清算优先权，或优先清算权(Liquidation Preference)，是指“清算事件”发生时，投资人在清算财产分配过程中享有优先顺位的权利。通常，越晚进来的投资人清算优先的顺位越高，但在老投资人强势时也可能会约定新老投资人之间平等顺位，按投资金额比例甚至股权比例分优先金额。相比实际上基本用不上的分红优先权，清算优先权是更实用、也更可能给投资人创造实际价值的经济权利。 2. 好坏通吃 清算优先权可以在公司情况不佳(downside)时让投资人优先拿回一点补偿，也可以在公司获得好的收购机会(upside)时使得投资人获利更多。 3. 只是清算？ 如果“清算事件”仅包括法律意义上的清算(例如公司解散或破产时的清算)，那实际用途不大，关键是它还包括“视同清算事件”。“视同清算事件”的情形通常包括导致控制权变更的合并、收购，以及出售、租赁、转让、以排他性许可或其他方式处置公司全部或大部分资产的事件。考虑到解散或破产清算时公司多半已经没有太多资产可分，发生并购事件才是清算优先权最大的用武之地。 4. 红筹架构下的视同清算 如果目标公司是红筹架构，可以约定“视同清算事件”也包括其子公司（包括VIE公司）的清算事件，这样如果目标公司股东以间接方式处置股权，或者目标公司处置其重要子公司的股权，投资人也可以优先获得回报。 5. 分配模式 根据谈判情况，投资人有三种清算优先下的分配模式：(1)先拿回优先分配额，再按比例和其他股东一同参与剩余财产的分配；(2)在按比例分配能拿回优先分配额时，全部股东按比例分配，否则，拿回优先分配额后不再参与剩余财产的分配；(3)拿回优先分配额后参与分配，但会设置一个分配上限，即超过上限后，不再获得超过部分的分配。在公司卖了个好价钱的情况下，按照持股比例进行分配也许会比上限金额更高，因此在第(3)种情况下，投资人应保留一个放弃行使清算优先权、转而按照持股比例进行分配的权利。 6. 优先分配额的计算 投资人的优先分配额可以是投资款的x倍(1~1.5倍之间较为常见)，也可以是投资款按照某年化收益率(8%~15%之间较为常见)计算出来的金额。 7. 红利和前期转股收益 一般投资人都会要求优先分配额包括已宣布但未分配的红利；但有时公司方也会要求从优先分配额中减去投资人已经从其股权中获得的收益(包括已出售股权得到的回报和已分得的红利)。 8. 清算优先和领售权组合 即使公司出售价格较低，清算优先权也使得投资人可以获得不错的收益。所以如果投资人同时享有领售权(Drag-along)且在此情况下还享有清算优先权的话，则理论上可以强行要求把公司以一个可能低于其真实价值的价格卖掉(如果条款约定可行)，拿回自己的优先分配额，实现快速退出变现。 9. 金额越高顺序越优先越好吗？…
New York Venture Hub
Sellout: Why Control is Key in the Sale of VC-Backed Companies
Every founder of a growth startup dreams of a big, successful exit -- a sale of the company for millions of dollars. But that dream could be shattered if the…
New York Venture Hub
Protecting Management from a Liquidation Preference Overhang
“The Founder of a $50 Million Startup Just Sold His Company — And He Didn't Make a Dime”. Such was the provocative headline of the Business Insider article last year…
New York Venture Hub
Why Valuation is Overvalued, Part II: Liquidation Preferences
In Part I of this two-part series, I explained how a favorable pre-money valuation can be undercut by a large option pool baked into the pre-money cap table. In this…
Federal Securities Law Source
Lessons from In re Trados: Conflicting Interests of Preferred and Common Stockholders
In our previous post about In re Trados, we provided some background on the facts, outcome and usefulness of the Trados case. In this installment, we will discuss the conflict of…
M&A Viewpoints Blog
Escrow Allocation Among Stockholders in Marginal Private Deals
By Lior Zorea
Marginal deals, those deals in which the preferred stock does not convert (or does not automatically convert) to common stock, can create very different economic interests and cause tension among…
The Venture Alley
Understanding VC Financings – Liquidation Preferences
By Trent Dykes
CONTRIBUTED BY Anthony Kappus anthony.kappus@dlapiper.com This installment of our series Understanding VC Financing examines liquidation preferences. Along with dividend rights, conversion rights, and anti‑dilution provisions, liquidation preferences are an essential…
Delaware Corporate & Commercial Litigation Blog
Interpretation of Liquidation Preference in Charter
In Matthews v. Grove Networks, Inc., download file, the court interprets the terms of a Certificate of Incorporation regarding a claim that the "Liquidation Preference" does not apply to merger…