the use of common stock in venture capital transactions
When raising chief for a bag adventure, a company can either lift debt chief, equity chief or a combination of the two. Debt chief is almighty dollar loaned to the company at an agreed absorption percentage for a fixed age period. Conversely, equity chief is almighty dollar invested by owners (shareholders) for statement in bag operations that charge not be repaid. Combinations accommodate convertible securities which may be debt that can be converted into equity at some point in the approaching.

The simplest anatomy of equity chief is accepted stock. Accepted stock has abounding distinguishing factors as follows:

• Accepted stock is not convertible into another type of security
• Each share enjoys one vote
• Dividends are payable without limit but alone when declared by the board of directors
• In liquidation, accepted stock holders are the last priority to which to distribute assets

In adventure chief transactions, there may be two types of accepted stock which are issued. The aboriginal is Class A accepted stock, which is according to preferred stock without the adapted voting rights which some statutes crave in shares labeled “”preferred.”” A second type of accepted stock is subordinate accepted stock. While this type of stock is not used actual frequently, it allows companies to amuse cheap stock into the hands of answer employees at minimal levy cost.

Determining what type of chief to lift and how to structure the financing transaction is of critical accent to growing ventures. As such, it is crucial to accept the answer terms and consult the adapted legal and bag advisors when embarking on the chief-raising action.

About the author:
GT Bag Plans has developed over 200 bag plans for clients that accept collectively raised over $750 million in financing, launched abundant advanced product and service lines and gained competitive advantage and marketplace share. GT Bag Plans is the sister site of GT Adventure Chief

Originall posted May 12, 2012