Buzz Archive:
The Liquidation Preference of Non-participating Preferred

by Jonathan D. Gworek of Morse, Barnes-Brown & Pendleton, PC, 7/17/2007

Recently introduced drafting options in the form model charter prepared by the drafting committee of the National Venture Capital Association (the "NVCA") have triggered a vibrant discussion among legal practitioners and venture capitalists. The discussion centers around one very fundamental question: What does a liquidation preference entitle non-participating preferred stockholders to receive in a liquidity event?

This week, VC Experts relies on Jonathan D. Gworek of Morse, Barnes-Brown & Pendleton, PC to provide a detailed overview of participating and non-participating preferred (kudos to Jonathan for the allocation examples). If you think all term sheet language is boilerplate, think again.