The secondary right of first refusal for transfers by key holders in the NVCA form includes an “all or nothing” restriction; Indeed, if investors agree to buy fewer shares than any person proposed by a key holder to sell to a third party, investors are deemed to lose their right of first refusal in the context of the transaction. The all-or-nothing restriction favours major holders, who are better able to extract the full value of their shares en bloc, as a potential buyer may attach a higher value per share to the acquisition of a larger stake. A sale of shares by primary holders of more than 50% of the voting rights of a corporation may constitute a sale of the corporation under the voting rights agreement, which, if supported by the required shareholders mentioned above in the “voting rights agreement”, could force the sale of the shares held by the investors to the acquirer. Such a sale would also trigger the requirement in the voting rights agreement that the terms of sale must be open to all preferred share holders and that the consideration offered must be structured to reflect the liquidation preferences of the company`s preferred share classes – thereby preserving value to the investor.  The NVCA form documents were prepared in 2003 by a group of in-house lawyers and private venture capital practitioners and published on the NVCA website. Since then, the forms have been regularly updated by a working group convened by the NVCA, and additional forms have been created to respond to specific situations or industries. See nvca.org/model-legal-documents/ for the current collection of NVCA form documents. It is often debated which provisions of NVCA agreements should be conceptually incorporated into the Charter or Regulations in order to ensure a higher level of applicability, in particular vis-à-vis third parties who are then presumed to be aware of the existence of such provisions. Appointment rights to the Board of Directors, vetoes to the Board of Directors, preventive fees and various other provisions contained in the IRA are generally the subject of this discussion. The parties seek to strike a balance between the investor`s desire for greater applicability of these rights and the Company`s desire to limit these key terms to confidential private contracts and not (in some jurisdictions) to publicly available documents. Depending on the jurisdiction and public availability of the Charter or Statutes, the parties will also attempt to limit as much as possible references to NVCA agreements in the Charter or Statutes in order to avoid being requested and published by the competent governmental authority (e.g. B in England via Companies House). One of the most common and important provisions of the IRA is the right of first refusal, which is referred to in NVCA agreements as the right to an initial offer on future share issues and unofficially as “pro-rated rights”.
This right allows shareholders who are eligible to participate in future fundraising in relation to their preliminary interest, and thus offers the possibility of avoiding dilution by investing more in the company. In form NVCA, subscription rights are extended only to large investors, using the same definition and expiry threshold as for the granting of information rights. In order to limit the burden on companies taking future equity rounds, the implementation of the process required for the subscription right may result in a significant administrative burden for the company, especially if the ownership of the company is held by a large number of investors from previous rounds. The lawyer should be aware that the subscription right may be mandatory under local law or provided for by default rules, depending on the jurisdiction and type of legal person. For example, under the legislation of most Latin American countries, including Brazil, shareholders of certain types of local issuers are granted pre-emptive rights by law, so they are often expected for reasons of local practice and extended to more shareholders than large investors, even if the issuer in question is not registered under local law. In addition, institutional investors who place bets on early-stage companies may demand extended pro-rata fees that allow the investor to take a disproportionate percentage of the next round of shares. .