What Happens to My Board Consent Rights the Moment My Portfolio Company Signs an LOI? 

How I Found Out 

My portfolio company just told me it signed a letter of intent to sell. Nobody asked me first. 

I still have a board seat. I still have consent rights in the investment documents. But the company is now locked into an exclusivity period with one buyer, and I’m finding out after the fact. 

Timing is the whole problem here. Once exclusivity starts, my ability to shop a better offer or get full information can shrink fast, whether or not anyone actually violated my rights on paper. 

Plain-English Breakdown 

What an LOI Exclusivity Period Actually Locks Down 

An LOI is mostly a non-binding outline of the deal. But the no-shop clause is usually one of the few binding pieces, and it takes effect the moment the company signs. 

• The company agrees not to solicit, negotiate, or accept competing offers for a set window, usually 30 to 90 days. 

• That window can run out the clock on any other buyer who might have paid more. 

• Once the LOI is signed, a better offer that shows up later doesn’t automatically get a seat at the table. 

Where My Board and Investor Consent Rights Actually Sit 

My investment documents likely give me consent rights over a sale, but those rights were drafted for the sale itself, not for signing an LOI to explore one. 

• Many charters only require preferred approval at the definitive agreement or closing stage, not the LOI stage. 

• If my consent right isn’t specifically triggered by signing an LOI, the board can sign one without me. 

• By the time my formal consent right kicks in, exclusivity has already narrowed the field. 

Information Rights Do Not Automatically Mean Real-Time Visibility 

I may have contractual information rights, but those usually guarantee financials and reports, not a running commentary on deal negotiations. 

• Management can legally run an LOI process quietly if my consent right hasn’t triggered yet. 

• Waiting for the formal information delivery cycle can mean learning about the deal only after the real leverage is gone. 

Common Founder Mistakes 

• Signing Before the Board Gets a Say. Founders and management often treat the LOI as a low-stakes formality. They sign fast to keep a buyer engaged, and the board process gets skipped along the way. 

• There’s no board call before the signature goes on. 

• No floor price or minimum terms get agreed on in advance. 

• Nobody talks through what happens if a better offer shows up next week. 

• Assuming Non-Binding Means No Risk. Founders assume that because most of an LOI is non-binding, nothing is actually locked in. That assumption misses the one piece that matters most. 

• The no-shop clause is often binding even when price and structure aren’t. 

• A long exclusivity window can quietly kill a better competing offer. 

• Non-binding language doesn’t undo the practical damage of a lost window. 

• No Fiduciary-Out Language Before Signing. Companies sign exclusivity without protecting themselves if a stronger offer surfaces mid-process. Without that language, exclusivity becomes a trap that benefits only the first bidder at the table. 

10-Minute Self-Check 

Before my portfolio company signs its next LOI, I work through this: 

• Does my consent right actually trigger at the LOI stage, or only at definitive agreement? 

• Was the board briefed on this LOI before it was signed? 

• How long is the exclusivity period, and is it market-standard? 

• Is there fiduciary-out language protecting a superior competing offer? 

• Have I seen the full terms, not just a summary, before exclusivity locks in? 

• Is there a floor price or minimum terms the board committed to before signing? 

• Do I know exactly what information I’m entitled to during the exclusivity window? 

If I can’t answer yes to all of these, I push to get the LOI reviewed before it’s signed, not after. 

Bottom Line 

The LOI signing moment, not the closing, is where real investor leverage gets spent. Exclusivity clauses do their work quietly, before consent or information rights ever trigger. I treat the LOI stage with the same scrutiny as the definitive agreement, or the value already built walks out the door before I get a vote. 

Should I Have Our Next LOI Reviewed Before Exclusivity Locks Us In? 

Schedule a free 30-minute call with our team to discuss your needs and concerns. 

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