Issues regarding Existing Preferred Stock

If there is any Preferred Stock existing at the time of a new financing, then careful thought must be given to the rights, preferences, and restrictions of the existing Preferred Stock. Here are some typical issues that arise with multiple series of Preferred Stock:

  • Approval of existing Preferred holders to amend the Charter;
  • Seniority of liquidation preference;
  • Whether or not to include protective provisions for each series (often yes);
  • Approval thresholds for each series;
  • Waiver of anti-dilution provisions in connection with dilutive financings;
  • Waiver or notice of Participation/pro-rata/ROFO rights;
  • Trigger of pay-to-play (if any); and
  • Extension of redemption rights (if any).