What restrictions can be placed on founder stock, and why?
Question:
What restrictions can be placed on founder stock, and why?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 100% (QA)
There are several restrictions that can be placed on founder stock and they are typically implemented to protect both the company and the founders themselves Heres a breakdown of some common restrictions and their purposes 1 Vesting Why Vesting ensures founders remain committed to the company for a certain period If a founder leaves before their shares fully vest the unvested portion typically reverts back to the companys stock pool This discourages founders from abandoning the company shortly after raising funds Structure Vesting schedules typically span several years eg 4 years with a cliff where some percentage eg 25 vests after an initial period eg 1 year and the remaining portion vests incrementally over time eg monthly 2 Lockup Agreements Why Lockup agreements prevent founders from selling their vested shares for a certain period after a funding round This prevents founders from cashing out too early and ensures they remain invested in the companys longterm success Duration Lockup periods can vary but are often 1218 months 3 DragAlong Rights Why Dragalong rights protect minority shareholders founders in case of a company acquisition If a majority shareholder investor agrees to sell their shares dragalong rights allow minority shareholders to sell their shares at the same price This ensures founders can benefit from an acquisition even if they dont own a controlling stake 4 TagAlong Rights Why Tagalong rights give minority shareholders founders the ...View the full answer
Answered By
Jayshree Rathi
Hello Students!
This is Jayshree Rathi. I work on a number of renowned student-centric channels such as Chegg, coursehero, as a certified private tutor.
If you are looking for relevant and original content to complete your assignments, essays, and homework, then contact me and within the promised time, I will deliver you your personalized academic work and help you score the best.
4.80+
1+ Reviews
10+ Question Solved
Related Book For
Fundamentals Of Entrepreneurial Finance
ISBN: 9780199744756
8th Edition
Authors: Marco Da Rin, Thomas Hellmann
Question Posted:
Students also viewed these Business questions
-
How does a leader's vision impact organizational effectiveness? and why
-
Does consideration have to be fair? Explain the difference between offer and invitation to treat . Give an example of each. What must be proven in every case order to have a contract set aside for...
-
What operational changes would you recommend to Wally to improve performance? Wally Meyer deftly balanced his office keys and a large printout of forecasting data as he wheeled his mountain bike...
-
In Problems 1968, solve each equation, if possible. -4 x + 4 || -3 x+6
-
Sammy's Sportshops has been very profitable in recent years and has seen its stock price steadily increase to over $100 per share. The CFO thinks the company should consider either a 100% stock...
-
When tasked with ventilation a fire fighter has numerous considerations to take into account before performing the task. List and defend 5 considerations that you take into account if and when...
-
If the RANS equation (17.5) is subtracted from the unaveraged \(\mathrm{N}-\mathrm{S}\) equation (17.1), we obtain the following equation for the perturbation velocity:...
-
A monatomic ideal gas expands slowly to twice its original volume, doing 300 J of work in the process. Find the heat added to the gas and the change in internal energy of the gas if the process is...
-
(Profitability analysis) Last year the P. M. Postem Corporation had sales of $440,000, with a cost of goods sold of $112,000. The firm's operating expenses were $130,000, and its increase in retained...
-
How do companies structure employee stock option plans?
-
Why do preferred shares automatically convert in case of an IPO?
-
The bars of the truss each have a cross-sectional area of 1.25 in 2 . Determine the average normal stress in members AB, BD, and CE due to the loading P = 6 kip. State whether the stress is tensile...
-
Find the point on y = 3 + x that is closest to (2, 2). (10 points)
-
Identify various ways to determine portfolio risk and return and provide relevant examples of each.
-
Allard Corporation uses the LIFO method. Using the information provided, what is the unit cost of the 17 units remaining in inventory at month end? Beginning of the month: 30 units of Product BN4,...
-
Medical insurance is a written policy between a provider and an insurance company. Question 18 options: True False
-
A certificate of limited partnership need not include: Name and address of limited partnership Name and address of each limited partner Name and address of each general partner Sworn statement...
-
A compound (C11H14O) has a strong peak in its infrared spectrum near 1700 cm-1. Its 200-MHz 1H NMR spectrum is shown in Figure 17.18. What is the structure of the compound?
-
Baxter, Inc., owns 90 percent of Wisconsin, Inc., and 20 percent of Cleveland Company. Wisconsin, in turn, holds 60 percent of Clevelands outstanding stock. No excess amortization resulted from these...
-
How to write a proposal on classism for picking majors of study?
-
How to write a thesis on a research project assignment? The topic is what are the stereotypes living with epilepsy?
-
PT. TPI will conduct a rights issue under the following conditions. Each owner 2 sheets old shares have the right to buy 1 new share at a price of IDR 3000 per share. Amount 100 million old shares...
Study smarter with the SolutionInn App