Governance and Control Terms

Governance and Control Terms

February 19, 2020 by investor

The terms sheet contains several investor rights relating to Governance and Control. 

Here are three of them:

 Right of First Refusal 

 The Right of First Refusal clause says that if a founder sells his or her shares, then the preferred share investor gets the right to buy those founder shares first. Doing so results in increasing the investor’s equity ownership in the company.

Participation Rights

This clause says that if the startup company sells shares to raise more funding, the current investors have the right to buy the shares first. 

Registration Rights

If the startup registers its stock on the public markets, then the startup must also register the investor stock shares and pay the legal fees for it.

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Hall T. Martin is the Director of Investor Connect which is 501c3 non-profit dedicated to the education of investors for early stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.

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