Withdrawal and exit

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

Withdrawal and exit2020-12-16T11:46:17+03:00

Breach of contract/contractual penalty

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

Breach of contract/contractual penalty2020-12-16T11:45:57+03:00

Right to information

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.

Right to information2020-12-16T11:45:42+03:00

Other special rights of investors (covenants)

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

Other special rights of investors (covenants)2020-12-16T11:45:22+03:00

Liquidation Preference

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

Liquidation Preference2020-12-16T11:44:48+03:00

Anti-dilution protection

Anti-dilution protection means that an investor desires compensation for an investment made in the event that in a follow-on round the company's valuation is lower than in the round in which the investors themselves joined the company. Protection is thus employed to secure against reckless promises of entrepreneurs and excessively high valuation demands.

Anti-dilution protection2020-12-16T11:43:12+03:00

New shareholders (partners or investors)

A separate clause on the inclusion of new shareholders and terms and conditions thereof is often written into a shareholder agreement, as the inclusion of new shareholders always dilutes the holding of previous owners (i.e. the holding of the old owners decreases by same order of magnitude as the percentage of shares given to

New shareholders (partners or investors)2020-12-16T11:42:59+03:00

Additional financing needs and other subsequent registration rights (warrants)

Frequently, investors do not commit themselves to subsequent additional rounds but wish to have the right under a special clause to participate in new rounds in addition to ordinary shareholder rights. In some cases it is possible to agree on, for example, the right of current investors to participate in the next round with

Additional financing needs and other subsequent registration rights (warrants)2020-12-16T11:42:39+03:00

Tag-along right, drag-along obligation and anti-lockout clause

A tag-along right means that if one of the other shareholders sells shares to a third party, the other shareholders have the right to sell the same share of their holding as the original seller. A drag-along obligation, on the other hand, obliges (e.g. founder shareholders) to sell their holding to a third party

Tag-along right, drag-along obligation and anti-lockout clause2020-12-16T11:42:04+03:00

Non-competition

Non-competition applies in general to all key personnel. Before drafting a non-competition clause, it is frequently necessary to go through the key personnel's contacts and commitments so that they can, as needed, be included in the shareholder agreement. Shareholder non-competition typically continues for two years after the termination of the agreement (bad leaver) and

Non-competition2020-12-16T11:41:50+03:00

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