Liquidation Preference
Who gets paid first when the company is sold
The order and amount preferred shareholders receive out of sale or wind-up proceeds before common shareholders get anything. A 1x non-participating preference — the investor takes their money back or converts to common, whichever is worth more — is the usual starting point in Canadian venture terms. Multiples above 1x, or participating preferences, shift substantially more of an exit away from founders and employees.
Have a question this glossary can't answer?
Tell us about your matter and a Ruby lawyer will follow up directly.