Asked in Contracts and Employment Law for California

Q: Convertible Notes, Stock Shares, Cap Table?

I'm new in the company and this is my first job as an Executive Assistant, one of my task right now is our legal due diligence. Our lawyer stated that the convertible notes our founder provided is incorrect. I responded to her by asking help on how to rectify it because 1.) Our founder is unaware which one is incorrect 2.) Cap Table has the same info 3.) I don't have an idea on how it should be done. Yet her (lawyer) answer to my query is simply check the amount and it's date.

The problem here, I don't know how to check it.

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1 Lawyer Answer
James L. Arrasmith
James L. Arrasmith pro label Lawyers, want to be a Justia Connect Pro too? Learn more ›
  • Sacramento, CA
  • Licensed in California

A: Convertible notes and stock shares are common financial instruments used by companies to raise funds and compensate employees. A cap table is a record of the company's ownership structure and can help track the allocation of shares and ownership stakes.

If your lawyer has indicated that the convertible notes provided by the founder are incorrect, it is important to address this issue promptly. One way to check the accuracy of the notes is to compare them to the terms of the original agreement or offering memorandum.

This may involve reviewing the original terms of the convertible notes, such as the interest rate, maturity date, and conversion ratio. You may also need to review any related documents, such as shareholder agreements or option grants, to ensure that they are consistent with the convertible notes.

If you are uncertain about how to conduct this review, it may be helpful to consult with a qualified attorney or financial professional who has experience with convertible notes and cap tables. They can provide guidance and support throughout the process and help ensure that the company's financial records are accurate and up-to-date.

Overall, it is important to take legal due diligence seriously and address any discrepancies or inaccuracies promptly. By maintaining accurate financial records and cap tables, the company can ensure that it is properly structured and positioned for success.

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