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December 02, 2004

VC Board members and Articles of Incorporation

Yesterday in a board meeting we reviewed revised articles of incorporation and they included the following added clause/resolution from THEIR lawyer. A clause that he said was the result of recent updates in Delaware law and designed to best protect the interest of venture investor board members, prevent conflicts and reduce disincentives to invest. The language follows below. May be worth considering as a best practice:

"In the event that a director of the Corporation who is also a partner or employee of an entity that is a holder of Preferred Stock and that is in the business of investing and reinvesting in other entities, or an employee of an entity that manages such an entity (each, a “Fund”), acquires knowledge of a potential transaction or matter in such person’s capacity as a partner or employee of the Fund or the manager or general partner of the Fund and that may be a corporate opportunity for both the Corporation and such Fund (a “Corporate Opportunity”), then (i) such Corporate Opportunity shall belong to such Fund, (ii) such director shall, to the extent permitted by law, have fully satisfied and fulfilled his fiduciary duty to the Corporation and its stockholders with respect to such Corporate Opportunity, and (iii) the Corporation, to the extent permitted by law, waives any claim that such Corporate Opportunity constituted a corporate opportunity that should have been presented to the Corporation or any of its affiliates; provided, however, that such director acts in good faith and such opportunity was not offered to such person in his or her capacity as a director of the Corporation."

Posted by at December 2, 2004 06:23 AM

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» Venture Capitalists and Corporate Opportunities from Conglomerate
A few years ago, the Delaware legislature offered a new statutory provision designed to obviate potential problems caused by the corporate opportunity doctrine. The new provision (122(17)) reads as follows: Every corporation created under this chapter... [Read More]

Tracked on December 8, 2004 07:11 PM

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