The Continued Evolution of the NVCA Documents

Posted Jan 2, 2019

Earlier this year, the National Venture Capital Association published the first major release of its model form venture capital documents since March, 2014. The new release of the documents was the culmination of a large group undertaking that included participation from many law firm and in-house venture capital lawyers from across the country. The more significant changes include the following:

Life Science Transactions

For the first time, the documents now incorporate drafting options that are specific to the unique nature of life science transactions.  This effort was driven out of recognition of the fact that certain business terms and other considerations in life science transactions are unique from other venture capital transactions.  In particular, the Model Form Stock Purchase Agreement and the Model Form Certificate of Incorporation now include drafting options that are typically used in milestone based transactions in which investors make commitments for additional funding in one or more subsequent closings subject to the achievement of certain milestones.  These changes include mechanisms to impose penalties that are triggered when investors breach their obligation to invest upon the achievement of milestones, and undersubscription provisions that allow the investor syndicate to raise sufficient capital for the company when investors breach their milestone closing obligations.  In addition, given the heightened relevance of intellectual property in life science transactions and the likelihood that the foundation intellectual property was developed outside the company (e.g., in a government funded university or similar research institute setting), the new Model Form Stock Purchase Agreement includes drafting suggestions specific to intellectual property representations and warranties.  In addition the Model Form Stock Purchase Agreement also includes representations and warranties directed at FDA and related compliance matters appropriate to the life stage of the company.

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