Preferred Shares

News & Analysis as of

Salamone v. Gorman, C.A. No. 8845 (Del. Dec. 9, 2014)

In this en banc decision, the Delaware Supreme Court affirmed in part and reversed in part the Court of Chancery’s decision interpreting a Voting Agreement governing the designation and removal of directors by preferred...more

Avoiding Common Pitfalls in Preferred Stock Transactions

Preferred stock issuances by Delaware corporations are often effected through a board’s “blank check” power contained in a company’s certificate of incorporation and permitted by Section 151(a) of the Delaware General...more

OHA Sheds Some Light on What Constitutes a “Class” of Stock

In my recent article about the impact of separate stock classes on veteran-owned firms, I discussed how having more than one class of voting stock can complicate an ownership analysis under both the Department of Veterans...more

Calculating Share Price With Outstanding Convertible Notes

Now that you have agreed on a company valuation with your investors, how do you calculate the price per share for your Series A financing? This can be especially tricky when the company has outstanding convertible notes that...more

Capital Structure Particulars in the Lifecycle of a Pre-Sales Revenue Biotechnology Venture Destined for IPO Success

The public securities markets and the underwriters that lead biotech companies into them dictate a common capital structure suitable for IPOs, which structure almost always deviates starkly from the capital structure of the...more

In re Westech Capital Corp., Consol. C.A. No. 8845-VCN (Del. Ch. May 29, 2014) (Noble, V.C.)

In this post-trial Section 225 decision, the Court of Chancery resolved a dispute about the meaning of two subsections of a voting agreement that determine how its signatories would designate the directors of Westech Capital...more

FINRA Clarifies Reporting Requirements for Tier 1 Capital Securities

Three Types of Hybrid Securities Subject to Classification and Reporting Changes - For some time now, there has been confusion regarding the appropriate trade reporting for certain hybrid securities. Hybrid securities,...more

Updates from the Fannie Mae DUS Multifamily front

In the past month, Fannie Mae has issued preferred equity guidance and has updated its adjustable rate loan document forms to account for the change in LIBOR administrator. - Preferred Equity Requirements: On...more

Muddy employee incentive issues in a disappointing exit: 9 practical tips for public company acquirers

In mediocre payout situations, transaction proceeds are unlikely to give a substantial (if any) return to common stockholders, yet may be sufficient to at least return the initial investment, and perhaps a liquidation...more

Lehman Brothers Holdings Inc. v. Spanish Broadcasting Sys., Inc., Consol. C.A. No. 8321-VCG (Del. Ch. Feb. 25, 2014) (Glasscock,...

In this memorandum opinion, the Court of Chancery held that preferred stockholders of Spanish Broadcasting System, Inc. (“SBS” or the “Company”) had acquiesced to the Company’s incurrence of additional debt while a dividend...more

North Carolina Business Court Limits Unfair and Deceptive Trade Practice Claims Concerning Internal Corporate Matters

On January 28, 2014, the North Carolina Business Court dismissed an unfair and deceptive trade practice claim alleging that corporate directors structured the sale of a corporation in a manner that shortchanged its common...more

The Business Court Takes A Narrow View Of When Claims Are "In Or Affecting Commerce" Under Chapter 75 Of The General Statutes

Chapter 75 claims have rarely fared well in the Business Court, though there is not much doubt about why they are included in almost every Complaint in the Court. The prospect of treble damages (per G.S. §75-16) and...more

Top 5 Delaware Case Developments in 2013 for M&A Practitioners

During 2013, in addition to the important changes to the Delaware General Corporation Law (“DGCL”) and the Limited Liability Company Act, described here, the Delaware courts issued a number of decisions that have a direct...more

Start-Up Raising Capital? Some Common Features of Preferred Shares & Why Some Select Preferred Shares over Convertible Debt

When you start a business and want to attract your first round of financing, Preferred Shares is one product that can be offered to Investors. Many Founders have asked us to explain exactly what Preferred Shares are and...more

In re Trados: Directors Dodge a Bullet

Vice Chancellor J. Travis Laster’s August 16 post-trial opinion in In re Trados Inc. Shareholder Litigation1 (hereinafter, “In re Trados”) has attracted a significant amount of attention. Much as both the Chancery and the...more

Banking Notes - October 2013: New Capital Rules for Community Banks

While small banks avoided some of the dreaded brunt of Basel III, this summer’s capital changes require all banks to reconsider their capital positions and may drive some banks to raise capital. Fortunately, the final rules...more

Delaware Court of Chancery Finds Board Did Not Breach Fiduciary Duties in Merger Where Common Shareholders Received Nothing

In a lengthy opinion following trial, Delaware Court of Chancery Vice Chancellor J. Travis Laster found the decision by the directors of a venture capital-backed company to approve a $60 million merger was fair, even though...more

Delaware Court Issues Important Trados Decision Delineating Director Duties in Sale of Venture-Backed Company

The Delaware Chancery Court issued its long-awaited post-trial decision last month in In re Trados Incorporated Shareholder Litigation. In the decision, the court affirmed that directors designated by the venture capital...more

Directors Designated By Venture Capitalists And Other Preferred Stockholders Need To Be Mindful Of Inherent Conflicts: In re...

A recent post-trial decision by Vice Chancellor J. Travis Laster of the Delaware Court of Chancery puts directors serving as designees of preferred investors on notice that they must attempt to maximize value for common...more

In re Trados S'holder Litig., Consol. C.A. No. 1512-VCL (Del. Ch. Aug. 16, 2013) (Laster, V.C.)

A former common stockholder filed a purported class action for breach of fiduciary duty arising out of the transaction, alleging that the former Trados directors breached their duty of loyalty by favoring the interests of the...more

In re Trados: What happens when common gets nothing?

This morning, Delaware Chancery Court Vice Chancellor Laster issued his highly anticipated, post-trial decision in In re Trados Incorporated Shareholder Litigation, C.A. No. 1512-VC (August 16, 2013), where the directors who...more

Contingent Capital Securities: Evolution Or Disruption?

Long before taxpayer-sponsored bailouts or state-sponsored “resolutions” of financial institutions came to occupy such a prominent place in our collective consciousness, financial institutions relied on hybrid capital...more

In re Wayport, Inc. Litig., Consol. C.A. No. 4167-VCL (Del. Ch. May 1, 2013) (Laster, V.C.)

In this opinion, the Court of Chancery, applying the “special facts doctrine,” rejected the plaintiffs’ claims for breach of the fiduciary duty of loyalty against the defendants arising out of sales of the plaintiffs’ stock...more

Delaware Chancery Court Expands Number of Direct Claims Available to Stockholders

On March 15, 2013, the Delaware Court of Chancery denied motions to dismiss filed by a group of director defendants and certain affiliated funds for claims brought by a group of stockholders. The claims allege that the...more

Seed Financing Survey 2012 Internet/Digital Media and Software Industries

In early 2011 we published our first Seed Financing Survey (for 2010) in recognition of the growing importance of seed financing to entrepreneurs and the venture capital environment, especially in the internet/digital media...more

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