Workers Compensation 101

« Back to Home

Dealing With The Legal Side Of Obtaining Private Equity

Posted on

Starting out in the business world can be exciting, especially when your company gets to the point that you want to start bringing in private equity to fund its expansion. It's easy to see why you might need to hire a venture funding attorney at that time, but you may also have to seek the help of people with other specialties. Let's take a look at some of the issues you'll face as your company starts riding the growth curve.

Obeying the Rules

While the government understands that smaller companies need space and flexibility to develop, you'll still want to have a securities attorney around to let you know what the reporting requirements are. As your firm expands, you need to keep up with the regulatory regime. A business that was once required to submit brief annual reports may grow into one that has to submitted detailed quarterly reports in a surprisingly short time frame.

The folks bringing money to your enterprise, in particular, have to comply with rules outlined in the Investment Company Act of 1940. SEC regulators begin to expect reports from investors once they have at least $150 million of non-public money under their direction. Just as your reporting requirements increase as your business grows, so do theirs. Given that many angel investors have diversified holdings, it can quickly get to the point that a venture capital attorney will need to be there to provide advice.

Doing M&A the Right Way

Over time, new businesses get acquired or start absorbing other enterprises. This process can be especially challenging to navigate, as the books need to be fully reconciled before the newly formed entity can move forward. A mergers and acquisition attorney can help you iron out tiny details that mean a lot, such as when the new organization begins operation, who its officers will be, and how things will be settled up with stakeholders from the old ones.

There's Always Something in the Details

When private equity comes into a business, particularly in the early days, the expected return is often fairly large. Investors want to see that their money will be recouped several-fold when a company turns into a hit. That means negotiating details like buyout clauses and stock options. A venture capital attorney can help you come up with arrangements that get you the money you require without giving away too much of its future. For more information, visit here.