Course Syllabus BUSINESS PLANNING: FINANCING THE START-UP BUSINESS AND VENTURE CAPITAL FINANCING Fall :50 to 11:50 a.m. Tuesdays Room C-403

Transcription

1 Course Syllabus BUSINESS PLANNING: FINANCING THE START-UP BUSINESS AND VENTURE CAPITAL FINANCING Fall :50 to 11:50 a.m. Tuesdays Room C-403 Course Objectives: This course introduces students to the various legal and business considerations involved in advising entrepreneurs in forming and operating an emerging growth business. The course uses a hypothetical start-up business as well as supplemental readings, sample agreements and class discussions to help students identify and deal effectively with the numerous issues presented for legal counsel to the start up and operation of a growth oriented business, including selecting and forming a business entity, structuring the economic benefits and management control among various owners, protecting intellectual property assets, and raising capital. The course begins with analysis of some of the issues confronting a start-up company in its earliest stages, examines the use of an LLC, both as an operating entity and as a vehicle for a joint venture, then addresses issues faced by company founders in contemplation of a subsequent venture financing. The course presents an overview of the venture capital industry and the significant legal and business issues involved in a venture financing from both the company and investor perspective. The course combines theory and practice in order to prepare students for the types of projects and challenges they will confront in the first year of a transactional practice. Required Materials: Therese H. Maynard and Dana M. Warren, BUSINESS PLANNING: FINANCING THE START-UP BUSINESS AND VENTURE CAPITAL FINANCING (2d Ed. 2014, Aspen Publishers). A good portion of the readings, particularly later in the semester, can be characterized as reference material that the students need to become familiar with for the designated class sessions, but should not be read for comprehensive recall. Likewise, sample documents and agreements are to be reviewed for familiarity and function in preparation for the class discussions. This technique of triage reading is important for transactional lawyers, who cannot possibly retain all the details of useful reference materials and forms, but must become familiar with those sources so that they may access the details when necessary in a time-efficient manner. Assignments: Students will be expected to attend class and complete the weekly Homework Assignments (which are presented in Appendix A of the casebook). With respect to each Homework Assignment, students are expected to bring two copies of the homework to class and turn in one copy at the start of the class period when the assignment is due. Students are to retain the second copy for their use during class discussion of the homework. Students are encouraged to collaborate regarding weekly Homework Assignments and class preparation. There will be no final exam. There will be three major s to be completed during the course of the semester, as set forth on the Syllabus below. This class satisfies the Upper Division Writing Requirement. Grading: 20% for attendance, class participation and weekly preparation (including timely completion of the Homework Assignments); 20% for #1; 30% for #2; and 30% for #3. The Homework Assignments are not graded. They are reviewed by the instructor to ensure that appropriate effort was made as part of each student s class preparation in connection with the preparation and class Therese H. Maynard and Dana M. Warren. All Rights Reserved..

2 participation score described above. The substance of each Homework Assignment is reviewed in the next class session. Any student following a class session who is not comfortable with his or her command of the issues raised in the homework discussed in that session should meet with the instructor to review that subject matter. Rules: Students are expected to complete each of the three Graded Writing Assignments independently. No collaboration or discussion is permitted. The Graded Writing Assignments do not call for research beyond the reading materials provided in the casebook and applicable corporations code statutes. The stated maximum page lengths for the s are not to be seen as expectations many very good papers are shorter. To conform to the standards for the Upper Division Writing Requirement, papers should have margins of no less than one inch on each side and should be presented in Times New Roman 12 point, or a font of equivalent size. Footnotes are prohibited. Papers may be single spaced, but grading includes an assessment of the value of the paper to the reader, which includes the ease of use by the reader. Single spaced papers without frequent paragraph breaks or section divisions are difficult to read and will be graded accordingly. s are due at the beginning of class on the due date. Consistent with Loyola Law School s anonymous grading policy, the s when turned in should show only the student s identification number. Students are to keep time sheets, just as in a law practice, showing their time spent on each and turn them in with their papers. So that the time sheets are outside the anonymous information used to grade the Writing Assignments, they are to be turned in separately from the Graded Writing Assignment materials and are to show the student s name. Questions on the s may be asked by , during office hours, or in class. Answers will be provided only in class, so that all students have access to the questions and the answers and any follow-up issues can be discussed with the group as a whole. Thus, the last opportunity for questions is the class session preceding the due date for that particular Graded Writing Assignment. After that class, no further questions will be addressed. As a consequence, it is very much in the students best interests to begin working on the assignments early so that they may discover their questions before the last opportunity for the Instructor to answer their inquiries has passed. The s are handed out at least three weeks before they are due. The time allowed is intended to give students the ability to complete the Graded Writing Assignments while managing their study schedules and other commitments without undue inconvenience. Unfortunately, some students leave the project to the last few days before the due date; thus, they lose the opportunity to raise questions and often don t perform as well as they would like. Lecture Topic Assignment 2

3 #1 Aug. 19 Introduction to Business Planning; Ethical Obligations of Business Lawyers #1 Draft Term Sheet for Marriage Proposal Read Chapter 1 Read Chapter 10 Documenting the Transaction Pages 617 to 638 (Part A., regarding use of Term Sheets and Letters of Intent) Review Sample Confidentiality/Nondisclosure Agreement Appendix B Pages 722 to 725 Review Sample Term Sheets for Employment Agreements Appendix B Pages 726 to 730 #2 Aug. 26 #3 Sept. 2 Choice of Entity; Introduction to LLCs #1 (Marriage Proposal Term Sheet) #2 Analyze LLC Operating Agreement Hypotheticals (Found in Appendix A Page 697) #1 Hand Out Formation of the LLC and the LLC Operating Agreement #2 (LLC Operating #3 Fiduciary Duties in LLCs (Page 699) Questions on Gr.Wr. Assmt #1 Read Chapter 2 Read Chapter 3 Pages 133 to 168 (Parts A., B., and C., regarding the development of the LLC entity and key provisions of Operating Review relevant provisions of Sample LLC Operating Agreement California Form, Appendix B Pages 731 to 754 3

4 #4 Sept. 9 LLC Operating Agreement (continued); Fiduciary Duties in the LLC #3 (Fiduciary Duty Hypotheticals in LLCs) Questions on Gr.Wr. Assmt #1 Read Chapter 3 Pages 168 to 208 (Parts D. and E., regarding scope of Fiduciary Duty obligations of managers and members) Review relevant provisions of Sample LLC Operating Agreements Appendix B Pages 731 to 777: California Form Generic Form #5 Sept. 16 #6 Sept. 23 Selected Issues under the Federal Securities Laws #4 Incorporation: Delaware vs. California (Page 701) #1 Due Formation of a Corporation: California vs. Delaware #4 (Incorporation: California vs. Delaware) #5 Equity-Based Compensation Hypotheticals (Page 702) #2 Hand Out Read Chapter 4 Read Chapter 5 4

5 #7 Equity-Based Compensation Read Chapter 6 Sept. 30 NOTE: No Class on Oct. 7 Open Class Day. Next Meet on Oct. 14. #8 Oct. 14 #9 Oct. 21 #5 (Equity-Based Compensation Hypotheticals) #6 Research and Identify Three Local Venture Capital Firms (Page 703) Questions on Gr.Wr. Assmt #2 Documenting the Transaction and Intellectual Property Protection #6 (Identify Three VC Firms) Questions on Graded Writing Assignment #2 Documenting the Transaction (Part 2); Raising Capital Overview of Venture Capital #7 Dividend and Liquidation Preference Hypotheticals (Page 704) #2 Due Read Chapter 10 Documenting the Transaction Pages 638 to 649 Parts B.1., 2. and 3, Preferred Stock Purchase Agreement and related topics Review Sample Loan Agreement Appendix B Pages 778 to 799 Review Sample Acquisition Agreement Appendix B Pages 800 to 816 Read Chapter 7 Intellectual Property Protection Review Sample Confidentiality and Invention Assignment Agreement Appendix B Pages 817 to 820 Review Chapter 10 Documenting the Transaction Pages 638 to 649 Parts B.1., 2. and 3, Preferred Stock Purchase Agreement and related topics Review Sample Loan Agreement Appendix B Pages 778 to 799 Review Sample Acquisition Agreement Appendix B Pages 800 to 816 Read Chapter 8 5

6 #10 Oct. 28 Preferred Stock Financing: Characteristics of Preferred Stock Dividend and Liquidation Preferences #7 (Dividend and Liquidation Preference Hypotheticals) #8 Anti-Dilution Hypotheticals (Page 705) #3 Hand Out Read Chapter 9 Pages 479 to 528 (Parts A., B., and C., regarding Overview of Preferred Stock, Dividend Preferences, and Liquidation Preferences) Read Chapter 10 Page (Part B.4., regarding the Amended and Restated Charter) #11 Nov. 4 #12 Nov. 11 Characteristics of Preferred Stock Conversion and Anti-Dilution Rights #8 (Anti-Dilution Hypos) #9 Term Sheet Comparison (Page 706) Questions on Gr.Wr. Assmt #3 Characteristics of Preferred Stock Redemption and Voting Rights #9 (Term Sheet Comparison) Questions on Gr.Wr. Assmt #3 Read Chapter 9 Pages 528 to 576 (Part D., regarding Conversion Rights and Anti-Dilution Protection) Read Chapter 9 Pages 577 to 615 (Parts E. and F., regarding Redemption and Voting Rights) Read Chapter 10 Pages 683 to 690 (Part B.7., regarding the Voting Review Sample Voting Agreement Appendix B Pages 821 to 835 6

7 #13 Nov. 18 Final Class Investors Rights Preemptive Rights; Board Rights; Registration Rights; Information and Audit Rights Founders Issues Rights of First Refusal and Co- Sale Rights Closing a Financing Transaction #3 Due Read Chapter 10 Pages 650 to 682 (Parts B.5 and 6., regarding the Investor Rights Agreement and Right of First Refusal and Co-Sale Read Chapter 10 Pages 690 to 694 (Part B.8., the mechanics of closing a financing transaction) Review Sample Investor Rights Agreement Appendix B Pages 836 to 857 Review Sample Right of First Refusal and Co-Sale Agreement Appendix B Pages 858 to 867 Review Sample Closing Document Checklist Appendix B Pages 868 to 870 7