Contact:

Ben Veghte
NVCA
202.864.5923
bveghte@nvca.org


FOR IMMEDIATE RELEASE:

Changes to Address Crypto-Currency and Sexual Harassment and Discrimination Among Changes

WASHINGTON, DC – As a continuation of the National Venture Capital Association’s (NVCA) commitment to convening the entrepreneurial ecosystem and making available resources to support new company formation, NVCA today unveiled updates to its model legal documents.  The first changes to the documents since 2014, the updates are the product of a group of inside and outside counsel to venture capital firms.  The updates were shepherded by the newly created NVCA General Counsel Advisory Board, which was created to maintain and update the model legal documents and provide guidance to NVCA on policy matters impacting venture capital and VC-backed companies.  The NVCA General Counsel Advisory Board is comprised of general counsels from NVCA member firms, outside counsels to member firms, and the academic community.

Through the support of the Advisory Board, as well as other attorneys, the model legal documents are made available as a free public resource.  By providing an industry-embraced set of model legal documents that can be used as a starting point, the model legal documents aim to provide a comprehensive set of internally consistent financing documents, promote consistency among transactions, and reduce transaction cost and time.

“If it were not for the generous commitment of time and expertise of the attorneys who spearheaded this effort, we would not be able to make these documents available as a resource to the ecosystem,” said Bobby Franklin, President and CEO of NVCA.  “The model legal documents page of the NVCA website is the most heavily trafficked area of our entire website and each document has been downloaded thousands of times.  We know how important these documents are to the ecosystem and we are proud to disseminate them to support startup investing and new company formation.”

Updates to the documents were informed by the changing dynamics of the industry, state law and other considerations to improve the documents from the last series of updates in 2014.  In total five of the documents received updates, including: 1) Certificate of Incorporation, 2) Investors Rights, 3) Right of First Refusal, 4) Stock Purchase Agreement, and 5) Voting Agreement.  In addition to the updates to the existing documents, NVCA is adding a model Confidential Disclosure Agreement.  While venture investors in the technology sector generally eschew these agreements, life science investors generally will enter into these agreements in advance of looking at proprietary and confidential information.

Some other highlights of the updates made to the documents include:

Life Science Transactions: For the first time, the documents now incorporate drafting options that are specific to the unique nature of life science transactions.  This effort was driven out of recognition of the fact that some business terms and other considerations in life science transactions are unique in certain respects from other venture capital transactions.

Crypto-Currency/Blockchain Protective Provision:  A new protective blocking right has been added to the model Certificate of Incorporation document to provide investors a veto over token, crypto-currency and block chain related offerings given that the pre-existing veto rights did not clearly apply to or cover these new types of offerings.

Anti-Harassment/Code of Conduct: A covenant has been added to the model Investor Rights Agreement document that requires the company to adopt and thereafter maintain a code of conduct governing appropriate workplace behavior and a policy prohibiting discrimination and harassment at the company. 

Delaware State Law Changes: The revised model documents provide a complete set of drafting options that allow practitioners to easily modify the dispute resolution provisions to take advantage of the Delaware Rapid Arbitration Act (2015). 

Drag Along Rights: A number of changes have been made to the drag along provisions in the model Voting Agreement document to ensure that the drag along can be effectively implemented and to reduce the potential for a minority stockholder claim. 

Redemption Rights: The model Certificate of Incorporation document has been modified to provide for the accrual of a high rate of interest on the redemption price payable with respect to shares of stock that are subject to a redemption request that has been unfulfilled by the company. 

Download the NVCA Model Legal Documents


About National Venture Capital Association

Venture capitalists are committed to funding America’s most innovative entrepreneurs, working closely with them to transform breakthrough ideas into emerging growth companies that drive U.S. job creation and economic growth. As the voice of the U.S. venture capital community, the National Venture Capital Association (NVCA) empowers its members and the entrepreneurs they fund by advocating for policies that encourage innovation and reward long-term investment. As the venture community’s preeminent trade association, the NVCA serves as the definitive resource for venture capital data and unites its member firms through a full range of professional services. For more information about the NVCA, please visit www.nvca.org.