Veto Rights

Veto rights give a company’s board of directors the right to refuse to approve a proposal, thus preventing its enactment. A few potential scenarios in which a veto might be leveraged include:- A proposal increase or decrease the amount of preferred or common stock- The creation of any new series or class of shares- The acquisition of another organization- The sale, dissolution, or liquidation of the companyWhen negotiating term sheets it is imperative that you understand the rights that your potential investors expect—do not agree to terms that you do not understand or have not discussed with your council. The last thing you want is to have a buyer lined up for your company, or have an acquisition that you want to complete, and the board vetoes you.

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