Drafting a Management Rights Letter
At the Weisblatt Law Firm, LLC, we have a proven track record of drafting effective documents for both companies that seek to enhance investor relations and for investors who seek to gain more access to a company than their current ownership interest permits.
You can take steps, such as draft a management rights letter, to ensure that your investments remain exempt under the Employee Retirement Income Security Act of 1974 (ERISA). If you are a venture fund manager or a venture capitalist seeking a management rights letter, contact our skilled business attorney today.
What Is a Management Rights Letter?
A management rights letter is, in essence, a contract that grants certain rights to investors beyond the default rights granted under the ownership agreement. Both company management and company investors may propose a management rights letter as a separate contract between the two parties.
A management rights letter often grants elevated privileges to the investors, such as permitting attendance at board meetings, inspection of accounts rights, and access to company financial documentation. The company may not make these into default rights, and thus they require negotiation and a separate contract. Often, companies employ a business attorney to create the management rights letter, which helps ensure the document properly addresses all relevant rights.
Benefits for Venture Capital
Putting a management rights letter in place and investing at least 50 percent of the funds in venture capital, a venture fund can qualify as a venture capital operating company (VCOC), which is then exempt from ERISA’s requirements. This is hugely beneficial for a venture fund, as ERISA lays out rigorous requirements.
You’ll need an attorney to draft a management rights letter if you are a company seeking venture capital or if you are a venture fund seeking to buy into a company. From the perspective of a company seeking venture capital, consider having a management rights letter available to venture funds to attract their investments.
Speak With a Business Attorney at the Weisblatt Law Firm, LLC, Today to Get Your Management Rights Letter
If you are a company seeking to attract venture capital investors, if you are a venture fund seeking to invest in a company, or even if you are simply part of a business transaction where the investor wants elevated access to the company, speak with a business attorney at the Weisblatt Law Firm, LLC. We will determine the exact needs of all parties, both to ensure that the investor has enough access to satisfy its needs while not granting unnecessary access.
A management rights letter is a complicated contract—but crucial to securing proper funding and qualifying for VCOC status as an exemption to ERISA. Our business lawyer has the knowledge to create the right management rights letter for your company’s needs. Call today at (713) 666-1981 or contact us online for information about getting your management rights letter in place.
Attorney Andrew Weisblatt
Mr. Weisblatt has practiced continuously since becoming licensed in 1992 and has represented businesses ranging in size from one person start-up ventures to multi-national corporations employing hundreds of people in multiple countries. From 2005 through 2009 Mr. Weisblatt was in-house counsel and chief operating officer of a multi-national corporation in the steel products industry. That in-house position provided valuable insight into how businesses work and what they actually need from their lawyers – both in-house and outside counsel. Attorney Bio