The Venture Alley - A blog about business and legal issues important to entrepreneurs, startups, venture capitalists and angel investors.

CONTRIBUTED BYTrent Dykestrent.dykes@dlapiper.com On February 22, 2013, in its Meso Scale Diagnostics, LLC v. Roche Diagnostics GMBH decision, the Delaware Court of Chancery held that a reverse triangular merger is not an assignment by operation of law, meaning that licensor consent is not required for the surviving entity to retain the target company’s rights, benefits and obligations under an existing technology license. For background, in a prior post, we discussed the impact of common M&A structures, as well as the impact of common anti-assignment provisions, on the assignability of contracts of the target company (in other words, whether or not the... More

CONTRIBUTED BY Kevin Criddlekevin.criddle@dlapiper.com    Anthony Kappusanthony.kappus@dlapiper.com One of the key considerations in structuring merger and acquisition (M&A) transactions is determining which contracts of the target company, if any, will remain in effect for the acquiror following closing.  This post will briefly outline: (1) the general rules of contract assignment; (2) the effect of anti-assignment clauses and other exceptions to the general rule of assignability; and (3) the effect of four common M&A structures on contract assignment. General Rule: Contracts are Freely Assignable The general rule is that contracts are freely assignable unless the contract itself, a statute, or public... More

CONTRIBUTED BYKevin Criddlekevin.criddle@dlapiper.com   Successful founders that fail to affirmatively make a Section 83(b) election may face staggering tax consequences years down the road. The Internal Revenue Code (the “Code”) generally requires founders (or employees) that are granted restricted stock for services to report income as the stock vests.  Accordingly, any increase in stock value beyond the purchase price is recognized at vesting, regardless of sale, and taxed at ordinary rates. Section 83(b) of the Code, however, allows founders (or employees) to affirmatively elect to be taxed on the value of restricted stock at grant rather than vesting.  Because the purchase... More