non-participating preferred

Kappus, Anthony R._photo_4742.jpg

CONTRIBUTED BY
Anthony Kappus
anthony.kappus@dlapiper.com

This installment of our series Understanding VC Financing examines liquidation preferences.  Along with dividend rights, conversion rights, and anti‑dilution provisions, liquidation preferences are an essential economic term of the preferred stock typically sold in a VC financing.

Liquidation preferences govern how a company allocates and distributes the proceeds from a sale, merger, dissolution, or other liquidation event.  The liquidation preference entitles holders of preferred stock to receive distributions of proceeds from an exit transaction before holders of common stock and other series of preferred stock with a lower preference priority and, in certain cases, entitles preferred stock to participate with holders of common stock after payment of the initial preference amount.Continue Reading Understanding VC Financings – Liquidation Preferences