Venture Capital Agreements In Germany

The delay in time in Germany to take into account the registration of shares with the German Registrar explains why the German investment agreements stipulate that the obligation for investors to pay their investments towards existing investors and shareholders and explicitly not vis-à-vis the company. We do not have such formulations in a British investment agreement. This misappropriation of liability protects investors from a situation where the company goes bankrupt and a judicial administrator tries to demand payment of his additional contributions. Since the company has no right to pay its own, the director is also not the trustee. We do not have the same reporting requirements in the United Kingdom with respect to the increase in social capital, so the face value and premium are paid as one; It is rare for documents to distinguish them. Looking ahead to the future and the UK`s imminent exit from the EU, London is still seen as the VC capital of Europe. However, it could be an opportunity for Germany to draw capital from the loss of certain comparative advantages, including, for example, the UK`s access to talent. The stakes in a German company Start-up GmbH are realized by a capital increase that creates and subscribes new shares for payment of their face value. Investors then agree to pay the “majority of the investment,” which we call premium in the UK, after registering the capital increase with the German Registrar, which can take up to 2 weeks. This is usually done by providing additional cash into the company`s capital reserves, but investors can also contribute to an existing converted loan or commit to providing certain services, including media services (such as discount advertising).

The most important recourse in British and German transactions in connection with VC transactions is compensation for infringement in the form of cash payments. In Germany, however, there are several alternative forms of compensation they do not find in the UK. This includes a capital increase (in which you reduce the valuation of the company`s advance by an amount corresponding to the loss incurred, and then issue new shares to place the investor who suffered the loss in the position he would be in if he had invested on the basis of the pre-issued valuation), a share transfer by existing shareholders or founders in a stock violation or withdrawal. But when we look at funding cycles, when there are common elements throughout Europe that support a healthy market, there are several factors that are unique to each country. Here are some of the most important differences I have seen between Ventures Deals in the UK and Germany, focusing on transaction documents, terms and conditions and the role of tax incentives.

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