Book 2 Table of Contents

Below is the table of contents to book 2 of The Encyclopedia of Private Equity and Venture Capital. A star () denotes premium content available to encyclopedia subscribers only.

Organizing the Entity: Choice of Entity and Structuring Private Equity

Introduction to this Book

• 2 - Organizing the Entity: Choice of Entity and Structuring Private Equity
• 2.1 - C Corporations, S Corporations, Multiple Corporations and Other Forms
• 2.1.1 - Note on the Corporate Form
• 2.1.1.a - C Corporations
• 2.1.1.b - S Corporations
• 2.1.1.b.i - Tax Opportunities and Pitfalls in Operating an S Corporation
• 2.1.1.b.ii - How will proposed new taxes on S corporation shareholders affect start-up technology companies?
• 2.1.1.b.iii - Royalty-Based Financing As A New Tool For Start-Up Financing?
• 2.1.1.c - Piercing the Corporate Veil
• 2.1.1.d - Is There Now a Federal "Veil Piercing" Standard?
• 2.1.2 - Other Forms
• 2.1.2.a - Sole Proprietorships
• 2.1.2.b - Business Trusts
• 2.1.2.c - Joint Ventures
• 2.1.2.d - Partnerships
• 2.1.3 - Note on Limited Liability Companies
• 2.1.3.a - Tax Considerations in Choice of Entity, and Working with LCCs
• 2.1.3.b - Reasons Behind the Bias of PE and VC Firms Investing in Corporations Instead of LLCs
• 2.1.4 - Note on Corporation versus Limited Liability Company
• 2.1.4.a - Options on LLC Units; Difficulties in Drafting and Implementation
• 2.1.4.c - Responding To Allocation And Liquidity Concerns Of Investors In PE And VC Funds
• 2.1.4.d - Flexibility versus Formality
• 2.1.4.e - Familiarity
• 2.1.4.f - Note on Creditors' Rights to Attach LLC Units
• 2.1.4.f.i - In Re Ehmann: Bankruptcy Court Permits Trustee Require Redemption of Debtors' Interest in LLC
• 2.1.4.g - Tax Issues Influencing the Choice
• 2.1.4.h - Conversion of an LLC to a C Corporation
• 2.1.4.i - LLCs in Bankruptcy: Trustee's Powers to Compel Asset Sales by Single Member LLCs (Ashley Albright)
• 2.1.4.j - Choosing Between The Delaware LLC Act and Other LLC Acts For Use in Private Equity Deals
• 2.1.4.k - How Tax-Exempt Investors Can Avoid UBTI: Structuring Private Equity Investments in LLCs
• 2.1.4.l - An Indirect Way to Foreclose on Membership Interests in Case of Default
• 2.2 - Choice of Domicile
• 2.2.1 - Calculation of Delaware Franchise Tax
• 2.2.2 - Personnel in Delaware Secretary of State's Office and Contact Information
• 2.2.4.a - The Delaware Flip: European Companies Reincorporate in Delaware
• 2.2.5 - Problems on Domicile in Massachusetts and New York
• 2.2.6 - Secured Bridge Loans to Emerging Companies
• 2.2.7 - Enhanced Liability Risks For VCs And VC Funds Extending Bridge Loans
• 2.3 - Organization of Corporation
• 2.3.1 - Certificate of Incorporation (Model)
• 2.3.1.a - Note on Corporate Name
• 2.3.1.a.i - Amending the Certificate of Incorporation
• 2.3.1.b - FAQs from the State of Delaware
• 2.3.1.d - Note on Purpose Clause
• 2.3.1.e - Note on Par Value
• 2.3.1.g - Note on Common Stock
• 2.3.1.g.i - Common and Preferred Stock and Effects on Valuation
• 2.3.1.g.ii - Case Study: The Common and Non-convertible Preferred Structure
• 2.3.1.g.iii - Charter Provision Requiring Class Arbitration
• 2.3.1.h - Note on Preferred Stock
• 2.3.1.h.i - Cram Downs Using Del. G.C.L. Section 242(b)(a)
• 2.3.1.h.ii - Preferred Stock Positions in Distressed Companies: The Secured Debt Alternative
• 2.3.1.j - Note on Pre-Emptive Rights
• 2.3.1.k - Note on Cumulative Voting
• 2.3.1.l - Note on Transfer Restrictions
• 2.3.1.m - Note on Contractual Transfer Restrictions
• 2.3.1.n - Note on Indemnification
• 2.3.1.p.i - Recent Delaware Court Rulings Highlight Need For Review Of Director Indemnification Arrangements
• 2.3.1.p.ii - Delaware Reinforces the Limits on Indemnification Claims
• 2.3.1.p.iv - When Do Private Equity Funds Have Standing to Assert Indemnification Claims?
• 2.3.1.q - Note on Exculpation
• 2.3.1.r - Note on Merger Moratorium Statutes
• 2.3.1.s - Procedures for Protecting VC-Nominated Directors of Portfolio Companies
• 2.3.1.t - Board of Directors:: VC's and D&O Insurance--The 7 Vital Questions to Ask
• 2.3.1.t.i - Bankruptcy and D & O Claims Settlements
• 2.3.1.t.ii - Section 11 Damages May Not Be 'Losses' Covered By The D&O policy--CNL Hotel and Resorts
• 2.3.1.t.iii - NY Insurance Depart. Will No Longer Approve D&O Policies Lacking "Duty-to-Defend" Coverage Feature
• 2.3.1.t.iv - NY Will No Longer Approve D&O Liability Policies Lacking "Duty to Defend" Provisions
• 2.3.1.t.v - "Ill Gotten Gains" and "Bump Up" Exclusions
• 2.3.1.t.vi - Warranty Letter Provides Basis to Reject D&O Defense Obligations, According to Tenth Circuit
• 2.3.1.t.vii - Note on Certificate of Designation
• 2.3.1.t.viii - D&O Insurance Policies Should Be Reviewed Due To Dodd-Frank and UK Bribery Act
• 2.3.1.t.ix - Competing Claims to D&O Liability Insurance Proceeds
• 2.3.1.t.x - Insured vs. Insured Exclusion Post Dodd Frank
• 2.3.1.u - Liability After Disney: Delaware Directors, Still be Careful!
• 2.3.1.u.i - Update on Disney: Decision on the Merits
• 2.3.1.v - Protecting the Outside Director: The "Red Flag Review"
• 2.3.1.v.i - Designating Delaware's Court of Chancery as the Exclusive Jurisdiction for Intra-Corporate Disputes
• 2.3.1.w - Company Directors Can Be Liable for Trade Secret Misappropriation
• 2.3.1.x - Delaware Court Applies Entire Fairness Analysis to Corp. Transactions with Controlling Shareholder
• 2.3.1.y - Selectica Decision Upholds Adoption and Use of 4.99% NOL Rights Plan
• 2.3.1.z - Two Noteworthy Delaware Court Rulings on Controlling Stockholder Transactions
• 2.3.1.aa - Delaware Court Again Rules that Rights of Preferred Stockholders are Primarily Contractual in Nature
• 2.3.1.ab - Delaware: The Fiduciary Duties of Directors in Negotiated Contractual Terms to Redeem Stock
• 2.3.1.ac - Delaware Court Sheds Light On Meaning Of "Funds Legally Available" For Preferred Stock Redemptions
• 2.3.1.ae - Delaware Court Refuses To Dismiss Breach Of Contract And Fraud Claims By Jilted Merger Partner
• 2.3.1.af - Delaware Court Declines to Rule that Term Sheet did not Create Binding Obligations
• 2.3.1.ag - Delaware Supreme Court Upholds Validity of "NOL" Rights Plan
• 2.3.1.ah - Delaware Chancery Court addresses application of Revlon standard to 50/50 cash and stock merger
• 2.3.1.ai - Delaware finds that a Reverse Triangular Merger may violate a contractual non-assignment provision
• 2.3.1.aj - Delaware Court of Chancery Applies Revlon Standard to Half Cash, Half Stock Merger
• 2.3.2 - ByLaws (Sample Form)
• 2.3.2.a - Note on ByLaws
• 2.3.2.b - Note on Audit Committee and Stock Exchange/Nasdaq Standards
• 2.3.2.c - Note on Stock Book
• 2.3.2.d - Note on Consideration for Issuance of Shares
• 2.3.2.f - Issuance for Notes and/or Services
• 2.3.2.g - Payment by an Employee Non-Recourse Note
• 2.4 - Choices of Business Entity
• 2.4.1.a - State Tax and Fee Traps
• 2.4.1.b - Tax Aspects of Private Equity, Venture Capital and Hedge Funds
• 2.5 - Organization Meeting Minutes
• 2.6 - Organization of an LLC
• 2.7.1 - LLCs With Offices in New York; Obligation to Qualify to do Business
• 2.8.1 - To 'LLC' or To 'C': That is the Question?
• 2.9.1 - Note on Preferred Dividend PIK Feature
• 2.9.2 - Note on Participating Preferred and Variations Thereon
• 2.9.2.b - To Participate or Not (Participating Preferences)
• 2.9.2.c - The Liquidation Preference of Non-participating Preferred
• 2.9.3 - Note on Conversion Rights
• 2.9.4 - Note on Anti-Dilution Protection
• 2.9.4.a.ii - Founder Anti-Dilution Protection - Man Bites Dog
• 2.9.4.b - Note on Full Ratchet and Weighted Average
• 2.9.4.c - Specific Anti Dilution Issues: The Death Spiral or The Infinite Regress
• 2.9.4.d - Limiting Anti-Dilution Provisions: Time limits; Performance Weights, Percentage Caps & Others
• 2.9.4.d.i - Case Study: Relationship of Dilution, Valuation & Investor Return
• 2.9.4.d.ii - Full Ratchet & Weighted Average (Broad and Narrow Based) Examples
• 2.9.4.d.iii - Narrow-Based Anti-dilution Calculation
• 2.9.4.f - Broad-based Weighted Average
• 2.9.5 - Note on I.R.C. §305
• 2.9.6 - Note on Exploding Preferred, Redeemable at Option of the Holder
• 2.9.7 - Delaware Supreme Court Affirms That Creditors Of Insolvent LLCs Do Not Have Derivative Standing
• 2.9.8 - Delaware Court: In Most Cases Appraisal is the Exclusive Remedy With Regard to a Short Form Merger
• 2.10 - Delaware Income Tax Overview
• 2.10.2 - Delaware Income Tax Overview: Allocation, S Corp's and Misc. Issues
• 2.10.3 - After the Music Stops: Delaware and Cayman Courts Opine on Fiduciary Duties of Fund Control Persons
• 2.12 - Delaware Forum Selection Bylaws Under Attack