For the past few months, I’ve been discussing the rights of VC investors in connection with preferred stock financings, such as veto rights, redemption rights, liquidation preferences, Board seats, etc. All of these rights are contractual in nature – that is, they are initially provided for in a term sheet and then incorporated into the definitive documentation.
There is another set of rights that many entrepreneurs may not be familiar with, however: State law rights. These are rights granted to stockholders pursuant to the respective laws of the company’s State of incorporation and are often the only rights that minority common stockholders have. Whether a minority common stockholder is a founder, advisor or even a friends/family investor, he or she will usually not be contractually granted any of the rights that are typically granted to preferred stockholders.
To read the full, original article click on this link: What are the rights of minority stockholders? | VentureBeat
Author:Scott Edward Walker
