Recording available after original program date, 1/11/2023
Many companies need additional capital to fund current operations and fuel growth. When raising capital, these companies often look first to their existing investor base. The company may build into its operative documents – shareholder agreements, operating agreements, even its articles of incorporation or organization – a plan whereby the company can “call” on existing investors to contribute additional capital. There are various mechanisms for achieving these types of “capital calls” and adjusting the ownership interests and other rights of incumbent investors who do not contribute additional capital. This program will provide you a practical guide to planning capital calls in closely held businesses, including how to adjust the financial and governance rights of the company’s owners.
• Advantages/disadvantages of requiring capital from existing investor base over time
• Forms of follow-on contributions – pro-rata and other structures
• Readjustment of stake in company when certain investors do not participate – dilution issues
• Voting, informational and related issues on the contribution of additional capital
• Obtaining additional capital from investors beyond the original
• Counseling clients about potential investor group disputes
Note: This material qualifies for self-study credit only. Pursuant to Regulation 15.04.5, a lawyer may receive up to six hours of self-study credit in a reporting year. Self-study programs do not qualify for ethics, elimination of bias or Kansas credit.