Here is your recap of important topics we covered last month. Did you miss them? Sign up now to receive future blog posts by email as soon as each is published.
Fast & cheap startup funding
SAFEs and KISSes: Alternative investment vehicles can help early stage companies get financed
Documents such as the Simple Agreement for Future Equity (SAFE) or Keep It Simple Security (KISS) may help speed up early stage financing as well as reduce costs. The documents contain a standard set of terms and conditions that an investor and startup can agree upon without protracted negotiations – so the startup can obtain its initial funding relatively quickly and cheaply.
The basic concept is that the investor provides funding to the company in exchange for the right to receive equity upon some future event.
However, use of SAFE or KISS may cause serious problems for investors. The primary problem here is uncertainty. The SAFE or KISS investor will be required to accept whatever valuation the company ends up using, as well as the other terms that the company agrees to. Additionally, what if the company never does the next round of financing?
Equity compensation plans
Chancery court holds board to heightened fiduciary duty standard in connection with equity awards
A recent case out of the Delaware Court of Chancery could result in heightened scrutiny of equity award grants to nonemployee directors.
Although the decision was rendered at a procedural stage, the court’s interpretation of prior Delaware precedent is not likely to change after a trial. Therefore, companies should carefully consider their equity compensation plans and the process for determining director equity compensation. Specific attention should be paid to evaluating the maximum amount that a beneficiary could receive under the plan and whether the plan should treat all classes of beneficiaries (executives compared to non-employee directors) the same.
Bob’s Upticks
Timely news and comments on securities and corporate governance developments.
Crazy is as crazy does – compensation run amok?
As we approach the end of the 2015 peak proxy season, the annual parade of articles and studies of executive compensation has begun.
If you accept that one symptom of insanity is to repeat the same behaviors over and over again while expecting different results, then it appears we’re in the midst of an epidemic of compensation craziness.
Why did anyone seriously think that say-on-pay votes would cause executive compensation to decrease?
I learned a long time ago – from the mouth of Pearl Meyer herself – that every attempt to rein in executive pay by legislation, regulation or disclosure (i.e., shame) has failed.
Yes! Please sign me up to receive email alerts from other Gunster practice areas.
This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.
About Gunster
Gunster, Florida’s law firm for business, provides full-service legal counsel to leading organizations and individuals from its 13 offices statewide. Established in 1925, the firm has expanded, diversified and evolved, but always with a singular focus: Florida and its clients’ stake in it. A magnet for business-savvy attorneys who embrace collaboration for the greatest advantage of clients, Gunster’s growth has not been at the expense of personalized service but because of it. The firm serves clients from its offices in Boca Raton, Fort Lauderdale, Jacksonville, Miami, Naples, Orlando, Palm Beach, Stuart, Tallahassee, Tampa Bayshore, Tampa Downtown, Vero Beach, and its headquarters in West Palm Beach. With more than 280 attorneys and consultants, and over 290 committed professional staff, Gunster is ranked among the National Law Journal’s list of the 500 largest law firms and has been recognized as one of the Top 100 Diverse Law Firms by Law360. More information about its practice areas, offices and insider’s view newsletters is available at www.gunster.com.
