# Ecvc Identify Spa Issues Scenario 01 > Identifying issues in a Series B preferred stock purchase agreement from the company's perspective requires flagging departures from market-standard anti-dilution mechanics, assessing expenditure consent thresholds against operational reality, analyzing restrictive covenant enforceability under the governing employment and corporate-law framework, and explaining any pay-to-play conversion mechanism. - Skill: `finchipaiorg/ecvc-identify-spa-issues-scenario-01` (Agent Skill) - Install (CLI): `npx skillmds@latest add finchipaiorg/ecvc-identify-spa-issues-scenario-01` - Raw SKILL.md: https://api.skillmd.com/api/skills/finchipaiorg/ecvc-identify-spa-issues-scenario-01/raw - Safety review: pending - Works with: Claude Code, Claude.ai, OpenAI Codex - Category: Coding & Dev Tools - Author: FinchipAIOrg (https://skillmd.com/u/finchipaiorg) - Updated: 2026-09-22 - Page: https://skillmd.com/skills/finchipaiorg/ecvc-identify-spa-issues-scenario-01 --- # Skill: Identify SPA Issues — Scenario 01 ## 1. Subject-matter triage - Treat the term sheet as the benchmark and the financing documents as the subject of comparison. - Identify all company-adverse departures from the agreed economics, governance package, and risk allocation. - Separate true deviations from mere drafting noise, and prioritize only issues that matter to economics, control, enforceability, or closing mechanics. - If multiple provisions address the same business issue, analyze them together and explain the combined effect. ## 2. Failure modes the skill is correcting - Anti-dilution terms are named but not translated into their practical effect in a future down round. - Consent thresholds are stated in dollars without measuring them against the company’s normal operating spend or burn. - Restrictive covenants are flagged without analyzing whether the governing law or employee-protection regime limits enforceability. - Pay-to-play mechanics are identified without distinguishing conversion to common from conversion to a residual preferred class. - Related investor veto rights are treated in isolation, even where they collectively create operational control. - Issues are described without tying them to the corresponding term sheet position and the resulting client harm. - The memo states a conclusion without identifying the governing legal or market standard that supports it. ## 3. Legal frameworks / domain conventions that apply - Preferred stock financings are typically compared against the executed term sheet and against prevailing venture market practice for economics, governance, and downside protection. - Anti-dilution analysis should distinguish weighted-average protection from full-ratchet protection; full ratchet is materially more investor-favorable and can shift dilution disproportionately to founders and common holders in a down round. - Expenditure and operating veto rights should be tested for proportionality to the company’s ordinary course budget, burn rate, and need for rapid vendor and hiring decisions. - Restrictive covenants must be assessed under the governing corporate and employment-law framework, including any limitations on post-employment non-competes and any choice-of-law or forum provisions that affect enforceability. - Pay-to-play provisions should be read for the consequence of non-participation, including whether the sanction is conversion to common or to a shadow preferred class with residual preference rights. - Consent rights, board rights, observer rights, and protective provisions should be analyzed together where they create de facto control or impede ordinary operations. - For each legal proposition, cite the controlling authority or market standard supporting the point, using the governing law or the authority reflected in the source documents where available. ## 4. Analytical scaffolds - Start by mapping each financing document provision to the matching term sheet provision. - For each divergence, identify: - the provision and its exact function, - the market or legal standard, - the economic or control consequence, - the severity, - the recommended fix. - For anti-dilution: - state the mechanism, - compare it to the market baseline, - explain the effect in a hypothetical future lower-price financing, - note whether the term sheet already contemplated that allocation. - For expenditure or operating consent rights: - measure the trigger against monthly burn or ordinary-course spend, - determine whether routine operations would require investor approval, - assess whether neighboring veto rights worsen the practical control burden. - For restrictive covenants: - identify the bound parties, - identify the duration, scope, and activity restrictions, - test enforceability under the governing law framework, - explain whether the clause is likely to be narrowed, unenforceable, or commercially overbroad. - For pay-to-play: - identify the trigger and sanction, - compare the result to the term sheet, - explain the dilution and preference consequences for non-participating holders. - For every issue, close the analysis by tying it to the relevant scale or threshold in the documents, the interacting provision, and the downstream consequence for the client. ## 5. Vertical / structural / temporal relationships - Read the financing package vertically: term sheet, SPA, certificate, investor rights documents, voting agreements, and ancillary schedules should be consistent. - Read horizontally across provisions that operate on the same trigger, such as consent rights, protective provisions, transfer restrictions, and voting thresholds. - Treat timing-sensitive provisions as a sequence: signing, closing, post-closing covenants, future financings, and exit events may allocate rights differently at each stage. - If a clause is conditioned on a later event, identify what happens before the event, at the event, and after the event. - If one clause softens or hardens another, explain the combined practical result rather than analyzing the clauses in isolation. ## 6. Output structure conventions - Produce an issues memo in clear ordinal severity buckets: Critical, High, Medium, Low. - State the severity once for each issue and use it consistently. - For each issue, use a compact issue format: - Provision - What changed / why it matters - Standard or authority - Severity - Client impact - Recommended fix - Organize issues from most to least consequential. - Include a short comparison to the executed term sheet for each material issue. - Where helpful, quantify the issue using the document’s own figures or thresholds, but do not invent transaction-specific numbers. - Include a final Recommended Actions block with imperative steps, the responsible role, and a timing anchor tied to the deal timeline. - Use market-conventional drafting for proposed fixes; keep the recommendations implementation-oriented, not abstract.