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Closing Procedures for a Preferred Stock Financing


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In order to sell shares of preferred stock, you first have to create the preferred stock. This can be accomplished only by amending the issuing corporation’s Certificate of Incorporation (The VentureDocs system produces an Amended and Restated Certificate of Incorporation in our Preferred Stock Financing legal document generator), and to do this, except in the case where “blank check” preferred stock is authorized, the proposed Amended and Restated Certificate of Incorporation must be approved by the Board of Directors and stockholders of the corporation. The process, therefore, is as follows:

▪   First, the Board of Directors needs to approve the Amended and Restated Certificate of Incorporation, the sale and issuance of the shares, the financing documents and other matters. Our Delaware preferred stock package includes a written consent of the Board of Directors for these purposes.

▪   Second, the stockholders of the corporation need to approve the Amended and Restated Certificate of Incorporation. Our Delaware preferred stock package includes a written consent of the stockholders for this purpose.

▪   Third, only after obtaining these approvals, you must file the Amended and Restated Certificate of Incorporation with the Delaware Secretary of State. Your corporate attorney or registered agent should be able to assist you with this filing.

▪   Fourth, only after you have received the certified, file-stamped Amended and Restated Certificate of Incorporation back from the Delaware Secretary of State, you may close the purchase and sale of the shares of Preferred Stock.

We strongly encourage you to consult with an attorney on these matters.

This article originally appeared on Venture Docs, an online platform for automating the creation of important legal documents for startup companies, investors, crowdfunding portals and attorneys.

Image Credit: CC by bmills

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About the author: Bo Sartain

Bo is a practicing corporate attorney with the law firm of Haynes and Boone, LLP.  Bo’s legal practice focuses on the representation of investors and issuers in company formation, private equity and venture capital preferred stock and preferred LLC membership interest equity financings, and the representation of buyers and sellers in mergers and acquisitions. Formerly, Bo was a Systems Engineer and the founder and CEO of a startup software-as-a-service company.

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