Venture Legal

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Top answer:

Generally speaking, a Fund should not enter into a Venture Partner agreement with a company, unless the company is wholly owned by one individual. Services provided to a Fund are typically very personal and delegation is usually unwant...

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Venture Legal

When are LP units redeemable?

Asked by:
Community Member
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Jan 19, 2024

This answer covers units, shares, etc. 

LPs
Top answer:

Limited Partners (LPs) are generally not issued units, shares, or any equivalents for their investment into a VC Fund - this is a common misconception. LPs simply own a percentage of the limited partnership's interests.  By design, the...

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Venture Legal

can i do crowd funding for a fund (ie. crypto fund - but doesn't have to be) anywhere in north america legally? anywhere in the world?

Asked by:
Community Member
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Jan 17, 2024

without minimum investment limits and the requirement for accredited investors?

Top answer:

Generally speaking, no - but it's complicated. Every country has it's own securities regulations regime (which may also interact with other countries' regimes), and nearly every one imposes restrictions, exemptions, etc. on crowd funding...

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Venture Legal

Investing and Operating in EU (with domicile in Delaware)

Asked by:
Community Member
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Dec 14, 2023

What are the requirements for European GPs opening a fund in Europe, even with domicile of fund in Delaware? Is there a need for a specific license to operate and invest in the EU?

Top answer:

European GPs (General Partners) looking to fundraise in Europe, even with the domicile of the fund in Delaware, face a complex regulatory environment. When pitching EU limited partners before the fund is launched, manager must adhere to ...

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By law, all offers and sales of securities within the United States must be either: • registered with the Securities and Exchange Commission (the SEC); or • issued relying on an available exemption from such registration. Generally spea...

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Community Member
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Venture Legal

Cornerstone Query: 'Non-Investments'

Asked by:
Community Member
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Nov 28, 2023

In the Cornerstone LPA, clause 3.2 mentions portfolio liquidity results with respect to 'non-investments'. Can you please explain what non-investments may be, and how their yield portfolio liquidity results?

Top answer:

Non-Investments are assets of the Fund that are not tied to Investments (ie investments in portfolio companies or cash equivalents).  For example, the Fund may have proceeds from a litigation that is unrelated to an investment.

 -  Hans Kim
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Venture Legal

What is Regulation S as it applies to VC Funds?

Asked by:
Community Member
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Nov 28, 2023

Top answer:

In the US, offerings of securities must be registered with the SEC or made pursuant to an exemption from registration. Regulation S provides an exemption for issuers to offer and sell securities in offshore transactions.  Regulation S ha...

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Venture Legal

Cornerstone LPA 2.0 agreement specifies that the fund can be dissolved, liquidated, and terminated by the election of the general partner. What are the typical cases making GP to make such a decision? Isn't it too risky for LP leaving it possible to have the fund terminated for any reason by the GP?

Asked by:
Community Member
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Nov 28, 2023

I wonder what are the provisions in the Cornerstone LPA 2.0 that will protect the LP from unjustified termination, such as LP approval of termination and what is the best industry practice to protect LP rights.

Top answer:

For the General Partner to unilaterally decide to wind up a fund is an edge-case - there aren't "typical" types of cases to speak of here. However as one example, a pending SEC investigation (which could implicate the General Partner) co...

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Venture Legal

Roles and limitations for LPs in portfolio companies

Asked by:
Community Member
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Nov 26, 2023

What roles in portfolio companies can LPs play, given their expertise or network? What are the considerations for these roles in order to avoid conflicts of interest?

Top answer:

It's not uncommon for LPs to take advisory roles in some portfolio companies. In addition, many LPs are often offered direct investment opportunities in follow-on or pro-rata opportunities. 

 -  Mike Suprovici
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Venture Legal

For Canada Domicile, there has been a lot of movement towards alberta (lower tax rates to start) - any thoughts on this differing from Ontario? (ie. some are newly dubbing alberta 'delware of the north' - true?)

Asked by:
Community Member
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Nov 10, 2023

Here are a few articles to review that have popped up in the last month: 1) https://www.theglobeandmail.com/business/commentary/article-albertas-aim-to-be-delaware-north-deserves-more-attention-from-canadas/?rel=premium 2) https://www.canadianla...

Top answer:

Ontario is an internationally recognized domicile. Alberta, BC and Quebec may make sense if all LPs and investments are from that region. Otherwise, Ontario is the recommended domicile because it's a hub. This means that there is a good ...

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Venture Legal

Mike had said there are 5 legal entities in domiciling in Toronto, Canada - what are they and why 2 extra then normal?

Asked by:
Community Member
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Nov 10, 2023

3 legal entitities of a venture capital firm venture capital firm typically consists of three legal entities:1. The Management Company (ManCo) - This is the enduring entity across all funds and is owned by the fund managers. It typically employs ...

Top answer:

See the diagram below: [Canada Cornerstone Structure.png]

 -  Mike Suprovici
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Venture Legal

Founder request for business help

Asked by:
Community Member
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Oct 12, 2023

A rockstar founder is asking me to help with his company - well beyond a bit of free coaching and guidance (negotiate a license, coach interim CEO, other substantial efforts) in exchange for equity &/or cash.  What are the top considerations prior...

Top answer:

Here are the main considerations: 1. Venture funds can't receive advisory shares. So, if the founder makes you an advisor, you can't transfer that ownership to the fund. 2. If you are an advisor or consultant, that will be a conflict of...

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Venture Legal

Where can I find the VC Lab’s template Stewardship Agreement?

Asked by:
Community Member
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Oct 10, 2023

It's mentioned in the Venture Partner agreement, but I cannot find it anymore.

Top answer:

A template Stewardship Agreement is available below: https://docs.google.com/document/d/1_wo2K7adTcEjARB3AgoPzW_PC8XHIUH7GrMTvutDsMQ/edit

 -  Adeo Ressi
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Decile Group strongly recommends not accepting any investors who are not accredited investors into a Fund, even if it is technically and legally possible (depending on the jurisdiction and the Fund's legal agreements). Such investors are...

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“The identity of the LPAC members will be disclosed to all the investors of the fund. Disclosure happens as part of the process of providing notice to investors of changes or approvals that have been made.”

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Venture Legal

How do we verify someone is an accredited investor before we talk to the? Is it illegal to talk to them about joining the fund if they are not accredited? (thinking for people with high salaries specific that we think may qualify but aren't sure of)

Asked by:
Community Member
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Sep 20, 2023

Looking for when to broach the topic of accreditation and how to bring it up in the conversation, this is for the closing of the PACT conversation.

Top answer:

As a manager, you need to get to know every potential limited partner before you pitch them, including doing research to understand if they are accredited. At the ned of the day, you need to use your best judgement. This is governed by g...