Guide for the preparation of a covenant partner

pact partners












In the covenant partners may include many clauses. In this guide we make a relationship that aims to be comprehensive, of common points.

Surely in particular cases there any clause that we could not collect, but consider that the vast majority, will be included in the relationship we do in this entry.

We now see the main points are usually established in pacts partners:

  • Identification of the signatories of the covenant.
  • Validity contract.
  • Constitution of society and social bodies of the same.
  • Determining relations pact between the members and the bylaws.
  • Assessment Company clearly pointing if data are "pre-money" or "post-money".
  • Determining wages Partner.
  • Participating loans provided by the investment partner.
  • Chance of a contract Participation accounts.
  • Clause Lock-Up: Used to prevent members entrepreneurs to leave the company and leave the investor partners "stranded" in the same.
  • Dividends: when you can distribute dividend, how to distribute and the amount, establishment of reserves, or part of the benefits that should be devoted to R & D.
  • Preferred Dividends: You can establish a right to receive dividends preferably, sacrificing the right to vote at the meeting.
  • Directors of the Company: How management of the company is done, the joint administrators solidarity, Board of Directors.
  • Decisionmaking: Limitation of the powers of the administrator: supermajority requirement for making certain types of decisions that may affect its relevance to the future of society, which initially may correspond to the administration.
  • Day to day management of the company: providing information with key data on weekly monthly, partners, annual budget and the annual accounts and quarterly, with a report on deviations from that, and audit the accounts or even inspect in situ.
  • Rights veto a decision by the members with a minimum percentage of capital.
  • Transfer of shares: this is very broad, possibly with a variety of agreements, although the most common are the following:
    Ban transmit for some time or certain natural or legal persons.
    Rights of first refusal: Single exclusion and recognition of the right.
  • Clause Ratchet: By this clause the borrower agrees to make an additional payment to the lender in the event of sale or change of control of the company
  • Clauses transmission restriction capital:
    Andorran Clause”: fixed partner selling price, and the other chooses whether to sell or buy.
    Clause "Drag Along”: right of shareholders to sell the 100% of society and drag in selling to others provided that the bid meets certain conditions of minimum price and payment terms. This prevents a minority block a sale of the company.
    Clause "Tag Along”: partner's right to sell its stake jointly with another partner who wants to sell their shares to a third party.
  • Clauses antidilución for the case that there may be subsequent rounds of financing in which the startup at a lower price values ​​which they entered. The main types of anti-dilution clauses are:1.- Terms precio medio pondered the "Weighted Average Price": A calculation of the new average price for the investor so that the total amount invested by the investor divided by the weighted average price will indicate the total number of shares to which it becomes entitled. 2.- “Full ratchet”: The old investor investor is entitled to apply to be your investment the average price of a new round of funding.
  • Clause pay to play: whereby the partners agree to participate in the corresponding proportion in future capital increases, so that if not done, miss the right of first refusal.
  • Assessment actions in case of departure of a partner: Here we can distinguish between "good leavers" or to be "good" and "bad leavers" or to be bad: as the output of a type or another, you can set different valuations of shares.
  • Clause acquisition rights based on partner performance: objectives can be set as sales, customers, billing or other.
  • Clauses “vesting” the grace periods: your goal is to get the retention of key actors in the development of startup. It is customary for some periods established 4 years in which the holders of shares or options may not sell.
  • Management commitment: The contribution of certain members working for the company can be invaluable: you can force it to maintain Membership shall develop certain tasks for the company. The aim is to ensure the permanence of the partners.
  • No competition and exclusivity by partners: unable to develop other activities.
  • Activities of the founders: It may require the founders dedication to 100% of his career in the company. To perform other professional activities committee approval is required direction.
  • Asset valuations provided by the partners, as can be software, domains or customer base and intellectual property boundary.
  • Forecast possible deadlock: establishment of mechanisms to ensure that no decisions can be made and locks society.
  • Clause liquidation preference: whereby investors ensure that in the event of liquidation or sale of the company, first charged the remaining shareholders, While the amount invested (in which case we speak of a multiplier x1) While a number greater (sometimes apply 3x multipliers as the amount invested or even higher).
  • Minimum prices Sale of shares.
  • Setting options buying and selling.
  • Clause “no-shop”: Commitment to the company and its partners are committed to,either directly or indirectly, 1.- Request, start, promote or attend any proposal, negotiation or offer from another person or entity other than "investor" in relation to the sale or capital of the company or the acquisition, purchase, rental, license or other disposition of the company or its assets. 2.- Participate in any discussions or negotiations concerning the matters indicated in the previous section, and shall notify "the investor" means any application relating to such third party materials. In the event that the company and the investor agreed not to conduct investment, the company is exempted from the obligation under this clause. "
  • Law joint selling: By this, the inverter ensures that if a founder sells part, one is entitled to sell a proportionate share in the same terms. If the founder could sell 20% Company, and the investor had a 50% thereof, in the new Information, the investor would have the right to participate in the sale with a 10% (the 50% the 20%).
  • Rights Intellectual Property: Agreement on Intellectual Property Company, signed by all participants in the same.
  • Insurance Keyman: Out insurance in anticipation of the demise of the key entrepreneurial startup.
  • Prevalence Pact partners against the statutes: Can be set in the event that there is a conflict between the two, pact partners prevail.
  • Reimbursement rights: You may agree that the Company repurchase the share of foreign investor to "n" years, the price at which it became. This gives an output window for the investor, you are not satisfied with your investment.
  • Duration of covenant partners: When it comes into force and when it ceases to have effect.
  • Linking new members the shareholder agreement.
  • Notice: establishing the confidentiality of the document.
  • Safe Harbor: in the event that any provision of the agreement is declared invalid, the remainder of the agreement shall continue in effect.
  • Clause for raising public pact, by notarial.
  • Jurisdiction and applicable law: competent court agreement on legislation to implement.
  • Provisions for conflict resolution: “Gin and Tonic clause” (meeting of CEOs of parent companies and key people in the startup to solve a problem), Arbitration Clause, submission to a decision by an expert.
  • Clauses on notification information.
  • Clauses economic criminal, relative to the damage that occurs yy exclusion from partners. The amount of these penalties is moderable by Judge, in case of conflict.

Surely in particular situations, there will be some clause of the partners is not presented in this relationship, but we believe that it can serve as a guide or checklist when work it.

Do you know any clause of the partners that are not included in our guide? Por favor, send us your comments. Thanks

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