Wednesday, March 17, 2010

Wearing a Pessimist hat for scrutinizing Legal Papers

Ok, lets face it - A legal paper, is something that holds good in court. And you wont go to court, unless you are in a disagreement. So, fundamentally, these are the terms and conditions you are supposed to abide by, should you be in court over disputes.

Great. Now you know. Wear that Pessimist hat.

Things will go wrong. You will fight. About deliverables, about commitments, about payments due, about expected scope of work, about time and deadlines.

Do not sign on any clause thinking "that will never happen". Want examples? "Right of first refusal", "Anti Dilution", "Liquidation Preference", "Drag along rights", "Tag along rights"... etc are all things you need to read very carefully - in a Share Purchase/Subscription Agreement.

Understand this about business - Everyone is trying to take as much of your money by giving you as little as possible. And you are trying to take as much of everyone's money by offering them as little as possible. Conflict of "Value Proposition" and "Pricing Premiums".

So read carefully to understand - What am I gaining, What am I losing, What are my commitments, What are their commitments. If there is some commitment they offer, but not in writing - insist on putting it down on paper. You wont regret this.

You may hear this often - "Some things have to be left to trust". Its bullshit - and it doesn't hold good in court. If you are engaging with a person/company for any reason, state the reasons on paper (of course in legal fashion - call them commitments from their side). Sign, and move on.

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