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October 9th, 2021

Subscription And Shareholders Agreement Bvca

Imagine you invest in the business and the next day you go to work for a bigger company, or they win the lottery and move to Hawaii, or there`s fraud or crime, or it turns out they`re just grossly incompetent. Well. Guess what. They probably won`t need to give back their actions at that time. If your assessment of the company depends on the destination of the company in the future and what might happen at the exit, then the management simply ate your lunch. What any investor wants is a series of Leaver provisions that are solidly wired into the articles of association – but what they get depends on the leverage they have in the negotiations. An important point that is often overlooked is that even a perfectly elaborate set of Leaver mechanics, who are housed in the statutes, can coincide if there is no management contract or a faulty management service contract to which they are linked. Ask for management contracts and, if nothing else, look at the termination and termination deadlines and how they are incorporated into Leaver`s provisions in the articles of association. Last July, we looked at this a lot. The next scenario on the list of end-of-the-world scenarios is the scenario in which you invest in the company and the next day, the management spends the money on one Ferrari each.

As a minority investor, you don`t control the company or the board of directors – but what you should ask for is a list of approval issues, including the reorganization of the share capital, the liquidation of the company, making important recruitment decisions, entering into agreements without any comparison, not buying Ferrari, etc. Normally, you would ask for new share issues to be added to the list, but be prepared to discuss this, as this will give you a de facto veto in the next round. There is a standard list of consents in the BVCA type action agreement, or ask us for an agreement. If you`re co-investing with other funds or angels, you`d expect deals where only the lead investor holds the reins of those consents (so the company doesn`t stop and wait for approval…) – but think about how much you trust the person holding the reins and where there are certain Carve Outs, for which your consent is required. You can`t make a deal without a heading chart. No, you really can`t — no matter how many draft documents between lawyers, how many calls from all parties are organized, and how much noise is made in the background. The cap table wireframes the agreement and is the structure on which the investment documentation is built. Creating and disseminating your investment contract, subscription contract, shareholders` agreement and articles of association before blocking the structure at Excel (or on an online cap-table platform) is like building a house without instructions. It is also a sure way to massively increase legal costs and exponentially increase the time and energy that all parties involved must invest in the agreement. In other words, even as we get closer to the third decade of this century, it is amazing how many agreements we see where the agreement, what the heading table looks like, is largely moved down the priority list to go around in circles on other topics. As a general rule, you want a new class of shares to be issued at each round/series to investors, and the share classes should be listed in the heading chart. Thus, the cap table should also impose the size of the pool of options (granted and not granted) and clearly indicate whether this is possible in the pre- or post currency.

However, when choosing a sequel for a seed funding round, the following factors should be considered: The BVCA would like to thank Susanna Stanfield (JAG Shaw Baker), John Heard (Abingworth), Sally Roberts (Accel), Jon Tilley (Practical Law), Andrew Wigfall and David Strong (both Marriott Harrison) for their continued support throughout this project. . . .

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