How to Track Liquidation Preference on Preferred Stock

How to track liquidation preference is a shadow-cap ledger after you already own preferred, not a primer on what prefs are. The National Venture Capital Association (NVCA) October 2025 Model Certificate of Incorporation does not lock a 1x non-participating rule. It prints two Section 2.1 and 2.2 alternatives (non-participating versus participating) and fills [__ times] the applicable Original Issue Price. Raziel's liquidation preferences explainer is the deal-term walkthrough. This page is the columns so a later sale does not surprise ownership.

This is not legal, tax, or investment advice. Raziel does not provide it. Copy the signed certificate of incorporation, not a market default.

Copy these columns from the charter

Open one row per series you hold, per issuer. Carta (August 7, 2023): the charter is the publicly filed document that details the type of liquidation preference. The NVCA model COI is a starting point. Your numbers are the fill-ins in the COI you received.

• Issuer and series. Legal name and the series printed on the stock (Series Seed, Series A, and so on).

• Original Issue Price. NVCA COI: a per-series dollar fill-in, subject to adjustment for a stock dividend, split, combination, or similar recapitalization. Carta: original issue price (OIP) is the price at which investors purchased preferred shares.

• Multiple. NVCA COI and the 2020 Term Sheet both print [__ times] the Original Issue Price or Original Purchase Price. Do not paste 1x unless that is the number in your charter.

• Participation. Non-participating, participating, or capped. The NVCA Term Sheet labels three alternatives. The NVCA COI drafts two Section 2.1/2.2 blocks. A cap, if any, is a separate fill-in.

• Seniority versus other series. NVCA COI default among preferred series: on a pari passu basis based on their respective Liquidation Amounts, and before any payment to Common Stock. Carta contrasts that blended stack with stacked preferences in which a later series is paid first. Copy the stack the COI actually ranks.

• Shares you still hold. Outstanding preferred you own after any conversion, repurchase, or transfer.

• Liquidation Amount (formula). Non-participating NVCA COI: greater of (i) [__ times] Original Issue Price plus dividends declared but unpaid, or (ii) the as-converted amount. Participating NVCA COI: [___ times] Original Issue Price plus dividends declared but unpaid, then remaining assets among Preferred and Common, pro rata, treating Preferred as converted.

• Remaining after partial proceeds. Escrow, holdback, tender, or a secondary that took some shares off the row.

• Conversion check. NVCA COI: each share converts by dividing Original Issue Price by Conversion Price. Carta: preferred holders convert when as-converted proceeds beat the preference.

• Document cite. COI section and date. Attach the PDF.

Seniority is what the COI prints

NVCA's model-documents page: the forms present potential options reflecting a variety of financing terms, and they are meant to avoid bias toward the venture investor or the company. The October 2025 COI's printed default among series of Preferred Stock is pari passu on Liquidation Amounts, before Common. A protective provision then blocks new capital stock unless it ranks junior to [or pari passu with] the Preferred Stock. That bracket is a draft choice. If a later series is senior, the COI has to say so. Log the order. Do not invent a stacked waterfall because a Series B closed after Series A.

Multiple, participation, and cap are fill-ins

NVCA 2020 Term Sheet, Liquidation Preference, three labeled alternatives:

• Alternative 1 (non-participating). First pay [__ times] the Original Purchase Price plus any declared unpaid dividends, or, if greater, the as-converted amount. The balance goes pro rata to Common Stock.

• Alternative 2 (full participating). First pay [___ times] the Original Purchase Price plus declared unpaid dividends. Thereafter, Series A Preferred participates with Common Stock pro rata on an as-converted basis.

• Alternative 3 (capped participating). Same first pay, then participation until holders receive an aggregate of [_____] times the Original Purchase Price, including that first pay.

Pulley's share-class glossary defines 1x non-participating as the greater of 1x money back or pro rata as converted, and 1x participating as 1x plus pro rata of remaining proceeds. Those are definitions, not a rule that your round used 1x. The multiple in the NVCA forms is a blank. Carta: capped participation stops the second dip at a cap, typically a multiple of the liquidation preference. Log the cap if Alternative 3 language is in your documents. Leave the cell blank if it is not.

Remaining preference after partial proceeds

A full sale is not the only cash event that moves the row. NVCA COI: Initial Consideration is allocated under Sections 2.1 and 2.2 as if it were the only consideration payable. Additional Consideration that later becomes payable is allocated after taking the prior Initial Consideration into account. Escrow or holdback is a bracketed choice: treated as Initial Consideration or as Additional Consideration.

If you sell some shares in a tender or secondary, those shares leave the row. Remaining Liquidation Amount is remaining shares times the per-share formula in the COI. If escrow holds back proceeds, remaining unpaid preference is the Liquidation Amount minus Initial Consideration allocated to you, then updated when Additional Consideration hits. Do not zero the preference because cash arrived. Raziel's MOIC calculator is multiple-on-invested-capital math after the preference has been applied, not a substitute for the charter.

A workbook holds this if each series is a row, the multiple and participation match the COI, seniority is copied not assumed, and remaining preference moves when escrow, a holdback, or a partial sale hits. It fails when you paste a 1x non-participating default, treat a later series as senior without a ranking clause, or ignore as-converted proceeds on a non-participating share. Raziel's startup investment tracker is the book those preferred rows already sit on: cash dates, documents, cap tables, IRR and MOIC. Raziel does not interpret your charter. Copy the columns. Leave the sale math to the documents you already signed.