A convertible bond loan is more flexible than a share arrangement and it is easier to exit. A convertible bond refers to a loan to which an option right has been attached. On the basis of the option right, the loan capital and the unpaid interest can be converted into a share investment if the
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A capital loan is a special type of loan. - - capital and interest may be paid in liquidation and bankruptcy of the company only with a preference which is lower-ranking than other debts; the principal may be otherwise repaid and interest paid only in so far as the sum total of the unrestricted
An option constitutes the right to subscribe new shares of the company, provided that the terms of the option right are fulfilled. Options are not usually an actual investment instrument, but they may be used as a part of the investment, especially if a business angel invests sweat equity or networks. Options can in
Shares can be transferred to an investor in three ways: when a company is formed, in a directed share issue or when purchasing them from founder shareholders. The most typical method is a directed share issue in which the company offers new shares to investors and the invested amount is recognised in the company's
The capital of a limited company is divided into two main groups: equity and liabilities. A monetary investment made by a business angel is usually equity-based or a combination of the characteristics of equity and liabilities, so-called mezzanine financing. In sweat equity-type investments, an investment can be executed either in advance, as in monetary
When a positive investment decision reaches a company, the entrepreneur should realise that the company is growing towards success together with the investors, not for the investors. Between three and seven years is the span usually determined for an investment, but occasionally the investment time approaches as much as 10 years. For the entire
The willingness of all the parties to comply with the provisions of the agreement is secured through a contractual penalty. The amount of the contractual penalty usually varies between 20,000 and 200,000 euros for each breach, and it is usually paid to the shareholders whose rights have been infringed or, if required by all
Investors generally have extensive information rights. It is extended to apply to the activities in such a way that it is expect that an investor will be on the board of directors, even though he or she would not actually participate in the work of the board.
At the time of the investment an investor wants to ensure, above all, that the money invested is used in accordance with the wishes of the investor to develop the company and increase shareholder value. For this reason the investor typically proposes in connection with the negotiations a shareholder agreement in which special conditions
Example Shares held by founders have 70 (70%) ordinary shares and investors have 30 (30%) preference shares The subscription price for founders has been €1 per share and for investors €10 per share, in which case the company's premoney is €700. A buyer offers a) 500 and b) €4,000 for all the company's