New Venture Lab: Equipping Christian Entrepreneurs

Legal Template: Management Rights Letter

The management rights letter is used by venture capital firms to build a case for an exemption from the ERISA Plan asset rules and a venture fund will generally ask each of its portfolio companies to sign a management rights letter in connection with the fund's initial investment. "Management rights," in turn, are defined as contractual rights running directly from the portfolio company to the fund that give the fund the right to participate substantially in, or substantially influence the conduct of, the management of the portfolio company.  In addition to obtaining management rights, the fund is also required to actually exercise its management rights with respect to one or more of its portfolio companies every year.

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