This is your opportunity to ask, “what’s on the exam?” And to hear in response, “I haven’t drafted it yet.”  Plus, there will be an opportunity to talk about anything and everything we have discussed over the semester.

We look at the two major types of investors for new ventures.

Who can buy shares?  What do they need to receive? Who can be paid a commission to introduce potential investors to the company?  What can a company say when it is talking with potential investors?  How do lawyers manage various risks for their clients?

Securities laws apply to every issuance of shares by a corporation.  A failure to comply with the rules can result in significant financial consequences as well as remedial actions taken by securities regulators against officers and directors personally.  This week we examine the basic structure of Canadian securities laws.

Startups present novel corporate governance challenges. The impact of these is exacerbated by the fragility of the enterprise and its constant proximity to insolvency. If directors and officers are not protected to the fullest extent of the law, they will decline to provide their time, expertise and capital to new firms.

What do boards of directors do? What kinds of things can go wrong as the board does its work?

The operating assumption of employment law is that the most vulnerable party in an employment relationship is the employee.  This is not true for many startup firms.  Well-drafted employment agreements can protect the company from strategic behaviour and expected changes to the employment relationship.  These agreements can even increase the value of a business and facilitate financings.

The most important advantages of a startup are usually connected to its trade secret regime. A key component of the regime are the restrictive covenants it imposes by contract on employees, consultants and commercial partners.No one goes to work for a startup for the salary — usually considerably less than they could make at another firm. The most talented hires by a new venture normally join for a chance to make themselves rich through participation in corporate equity incentive programmes.

Shareholder agreements are one of the principal ways power in a corporation is allocated. They also permit investors to manage the risk profile of their investment. Unfortunately, there are several different ways poorly chosen shareholder agreement terms can significantly interfere with the success of the enterprise.

How do you decide when to incorporate? Is a corporation always the right choice for a new business? How do founders split up the ownership of the new enterprise?

Corporate lawyers are tasked with creating legal structures that will survive whatever the future holds, allocating risk appropriately.  This means that before you can draft contracts and give legal advice, you need to know what kinds of things often happen to startups.  This is particularly important because no institution changes as rapidly as a growth company.

Corporations are the most common type of business organization for startups. How do they work?