Syndicate Legal Advisory Services prepares the complete set of documents required for a corporation to create a new class or series of preferred stock by certificate of designation — the instrument by which a board of directors, acting under “blank check” authority in the certificate of incorporation, fixes the rights, preferences, privileges, and restrictions of a series of preferred stock without a shareholder vote and files them with the state as an amendment to the charter — in Delaware and in every other state whose corporation statute provides the mechanism. A certificate of designation is the central document of a priced equity financing: it defines what the investors are buying — their liquidation preference, dividend rights, conversion rights, anti-dilution protection, voting rights, protective provisions, and redemption rights — and it becomes part of the corporation’s charter, binding on the corporation and every holder. It is also used for preferred stock issued in acquisitions, recapitalizations, strategic investments, and rights plans. Working from the client’s term sheet, charter, and capitalization records, we draft the certificate of designation to the terms the parties have agreed and to the statute’s requirements, together with the board approvals, the conforming financing and capitalization documents, the filing, and the records that reflect the new series. State filing fees, certified-copy fees, and other third-party charges are not included in the flat fee and are the sole responsibility of the client.
Scope of work includes:
Designation planning and intake — a structured intake and written summary confirming the corporation’s state and the blank-check authority in its charter (the number of authorized but undesignated preferred shares, the board’s authority to fix the terms, and any limits the charter or an existing series imposes), the term sheet or agreed terms for the new series, whether an existing series must consent to the creation of a senior or pari passu series under its protective provisions, whether the authorized preferred is sufficient or a charter amendment to increase it is required (which does require shareholder approval and is coordinated with the firm’s certificate-of-amendment service), the number of shares to be designated and the reserve for conversion, and the filing timing relative to the financing closing.
Review of existing documents — review of the certificate of incorporation and all amendments and prior certificates of designation, the bylaws, the capitalization table, existing investor-rights, voting, right-of-first-refusal, and co-sale agreements, and the statute, with a written summary of the existing series’ rights that the new series must be ranked against, the consents required, and the provisions of the new series that must be reconciled with the existing charter and agreements.
Certificate of designation — drafting of the certificate in full, with the statutory recitals (the corporation’s name, the board’s authority, the resolution creating the series, and the number of shares designated) and the terms of the series: the designation and number of shares, and the board’s authority to increase or decrease the number within the authorized limit; ranking relative to common stock and other series as to dividends and liquidation; dividends — the rate, whether cumulative or non-cumulative, the accrual and payment mechanics, participation with common, and the restriction on junior dividends; the liquidation preference — the amount, any multiple, the participation feature and its cap, and the definition of a deemed liquidation event (merger, sale of control, or sale of substantially all assets) and the treatment of consideration; conversion — the conversion rate and price, optional conversion by the holder, mandatory conversion on a qualified public offering or by vote of the series, and the mechanics of conversion; anti-dilution — the adjustment for stock splits, dividends, and recapitalizations, and the price-based adjustment for dilutive issuances on a broad-based weighted-average, narrow-based, or full-ratchet basis, with the exempted issuances and the pay-to-play provision where agreed; voting — the as-converted vote with common, any series vote, and the right to elect one or more directors; protective provisions — the matters requiring the series’ separate consent (charter amendments adverse to the series, new senior or pari passu stock, redemptions, dividends, a sale of the company, debt above a threshold, changes in board size, and the like) and the threshold of holders required; redemption — the optional or mandatory redemption rights, the redemption price and dates, and the statutory solvency limits; the notices, waivers, and amendment provisions; and the reissuance and retirement of redeemed or converted shares. For a series created in a rights plan, acquisition, or recapitalization, the certificate is drafted to that transaction’s terms.
Board approvals — the board resolutions adopting the certificate of designation, fixing the terms of the series, authorizing the filing, reserving common stock for conversion, and approving the related financing documents, with the interested-director procedure where an investor designee sits on the board; the consent of existing series under their protective provisions; and the officer’s certificate certifying the adoption.
Filing and effectiveness — preparation of the certificate for filing with the Delaware Secretary of State or the equivalent office in the form and with the cover sheet the state requires, the coordination of the filing time with the closing, the retrieval of the certified copy, and the confirmation that the filed terms match the executed financing documents.
Conforming financing and capitalization documents — the stock purchase agreement, investor-rights agreement, voting agreement, and right-of-first-refusal and co-sale agreement where the firm is engaged to prepare them, drafted consistently with the certificate (or the conforming review where the investors’ counsel prepares them); the updated capitalization table reflecting the series and the conversion reserve; the stock certificates or the uncertificated-share notices for the series with the legends; the securities-law exemption documentation and the Form D and state notice filings for the issuance; the updated stock ledger; and the notifications to the transfer agent, the equity-plan administrator, and lenders whose consent the issuance requires.
Deliverable: a complete, indexed designation file (electronic and hard copy) containing the written summary of the review, the filed or file-ready certificate of designation and the certified copy, the board resolutions and existing-series consents, the officer’s certificate, the conforming financing documents where prepared, the updated capitalization table and stock ledger, the securities-law filings, the series-terms summary and calculation worksheet, and the compliance calendar, with a signature-ready version of each document for execution by the directors and officers.