For California corporations, that have not issued any shares, filing a Certificate of Determination to establish the rights, preferences, privileges, and restrictions of their unissued stock, if there are tag-along and drag-along provisions on those shares, must those be included in the certificate? And must it also include any rights of first refusal (i.e. shareholders must offer their shares to the issuer before they can transfer them).
Like Attorney Doland, my initial reaction was, "What is a Certificate of Determination?".
With a little research, I now understand its role:
- Articles of Incorporation may specify preferred shares' "rights, preferences, privileges, and restrictions".
- Alternatively, Articles may specify that rights, preferences, privileges, and restrictions will be determined by the board of directors.
- The board resolution that specifies such rights, preferences, privileges, and restrictions *must* specify *all* pertinent rights, preferences, privileges, and restrictions.
- It is up to the board to decide, for a given class or series of shares, precisely which rights, preferences, privileges, and restrictions apply. Tag, drag and ROFR are not mandatory - but if they are not included in the resolution, then they do not exist.
- The Certificate of Determination is an officer's certificate certifying that the board resolution attached to the Certificate was duly adopted by the board on a specified date.
Certificates of Determination are obscure tools because rights, preferences, privileges, and restrictions typically are specified in the Articles.
I agree with my colleagues: Please don't try to do this by yourself. The likelihood that you will do it properly is somewhere near zero.
This information does not constitute legal advice and does not establish an attorney-client relationship.
What is a certificate of determination? The certificate normally does not contain restrictions (other than notices of non-registration with the Securities Act) - those restrictions are in bylaws or shareholder agreements.
The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here.
Typically, tag-along and drag-along rights and rights of first refusal are granted in investor agreements and are not necessarily applicable to an entire class of shares (and thus are not included in the Certificate). If you have questions specific to your situation, you should consult with an experienced Corporate Attorney.
The foregoing discussion does not establish an attorney-client relationship, is qualified by the limited facts presented above, and should not be relied upon as legal advice. To obtain definitive legal advice upon which one can rely necessitates retaining an attorney who is qualified in this particular area of the law.
Our Rating is calculated using information the lawyer has included on their profile in addition to the information we collect from state bar associations and other organizations that license legal professionals. Attorneys who claim their profiles and provide Avvo with more information tend to have a higher rating than those who do not.What determines Avvo Rating?Experience & background
Years licensed, work experience, educationLegal community recognition
Peer endorsements, associations, awardsLegal thought leadership
Publications, speaking engagementsDiscipline