CAUTION: Director Veto Rights in Financing Documents May Constitute “Disproportionate Voting”

Guest post by Lewis J. Geffen, Soobin Kim of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. 

Section 141(d) of the Delaware General Corporations Law (DGCL) allows the certificate of incorporation (COI) of a Delaware corporation to confer upon one or more directors voting powers greater than or less than those of other directors, thus resulting in “disproportionate voting” rights amongst the Directors.  When VC funds, their portfolio companies and VC lawyers read or think about DGCL 141(d) and this disproportionate voting, they usually, and narrowly, have in mind only the question of whether certain directors may have more than or less than one vote per Director on matters voted on by the Board, or a committee of the Board. 

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