The Perfect Corporate Board: A Handbook for Mastering the Unique Challenges of Small-Cap Companies

CHAPTER 5NEGOTIATING DEFINITIVE TERMS

Leveling the Playing Field with Investors

Key considerations for directors:

• Small-cap investors enjoy a material advantage over companies when negotiating financings.

• Regardless of the structure, boards need to make sure that they understand pricing mechanisms, which are often not as straightforward as they seem.

• Convertible instruments have a litany of provisions that might seem innocuous but that require board scrutiny.

• What companies thought they agreed to in a “term sheet” might look very different once the definitive deal documents arrive.

• Officers and directors need to involve counsel and auditors in financing negotiations every step of the way.

Common mistakes to avoid:

• Before small-cap ...