Adverse Change Redemption

A right of a shareholder that requires the company to redeem a class of securities in the event the company experiences a material adverse change to its prospects, business or financial condition. This is a negotiated right that you expect to see in down economic cycles where investors tend to have more bargaining power than the companies seeking to raise capital. Startups should seek to avoid such a provision when negotiating a funding round for a variety of reasons, including the vagueness of the "material adverse change" trigger.