A new investor for your company:
2 min read
The incorporation of capital in a startup starts with the negotiation between the parties. Then we will see below what is important to take into account previously and what points are essential in the agreement.
The result of it will determine how the association will be from now on and the guarantees for each part.
How the company will be managed:
The work dynamics between the Board of Directors and the General Meeting must be clear. Normally the new investor will want to be part of the Administrative Council to accept (or not) the agreements that will be discussed in the future; although he can also choose to be left out of these types of decisions. In the General Meeting usually, the investor will choose to take part in the decisions that affect the capital, the modification of the statutes or other topics that would be crucial for the continuity of the company.
Investor Rights - Three clauses must be negotiated:
"Preferential liquidation": With this, the investor will be able to recover his investment before the other partners. He can also choose to receive a payment less than his contribution.
“Divestment”: Determines how the investor will leave the company when there is an offer to buy the company. Here you can find two more clauses, see Drag Along (the majority shareholder decides whether or not to force the rest to go to the sale) or Tag Along (Allows minority partners to accompany the sale or not)
"Anti-dilution": Establishes the investor's right to receive more shares if, in a subsequent capital increase, the value of the company is less than a certain import (they must negotiate the amount).
Duty of the Founders: Their relationship in the project and outside of it will agree on several very important commitments. Permanence, Exclusivity and Non-competition. They mean respectively: the time that each one will be obliged to stay in it, whether or not they work full time and the duration and terms for the founders not to compete with this start-up.
Operation: Last but not least, It will be necessary to determine what economic information, the terms and the time that is allowed to give the investor to transfer shares and company stock.
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