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Startup Investment Agreement Template for Germany

A comprehensive legal agreement governed by German law that outlines the terms and conditions under which an investor provides capital to a startup company in exchange for equity ownership. The document addresses key aspects including investment amount, valuation, share class rights, governance provisions, investor protections, and exit mechanisms, all while ensuring compliance with German corporate law requirements, particularly the GmbH-Gesetz and related regulations. It establishes the framework for the investment relationship and includes provisions for information rights, board representation, and future funding rounds.

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What is a Startup Investment Agreement?

The Startup Investment Agreement is a crucial document used when investors are taking an equity stake in a German startup company. It serves as the primary instrument for documenting the investment terms, rights, and obligations of all parties involved. Typically used in Series A or later funding rounds, this agreement must comply with German corporate law requirements and investment regulations. The document covers essential elements such as share subscription, corporate governance, minority shareholder protections, and exit provisions. It's particularly important in the German context due to specific legal requirements around GmbH (limited liability company) operations and share transfers. The agreement needs to balance the interests of investors seeking protection for their investment with founders maintaining sufficient operational flexibility to grow the business.

What sections should be included in a Startup Investment Agreement?

1. Parties: Identification of the contracting parties including the company, existing shareholders, and investor(s)

2. Background: Context of the investment, company status, and purpose of the agreement

3. Definitions: Definitions of key terms used throughout the agreement

4. Investment Amount and Valuation: Details of the investment sum and company valuation

5. Share Subscription: Terms of the share issuance, class of shares, and nominal value

6. Closing Conditions: Prerequisites that must be met before the investment is completed

7. Warranties and Representations: Statements of fact and promises made by the company and existing shareholders

8. Information and Control Rights: Investor's rights to company information and involvement in decision-making

9. Transfer Restrictions: Limitations on the transfer of shares and pre-emptive rights

10. Anti-dilution Protection: Mechanisms to protect the investor's stake in future funding rounds

11. Exit Rights: Provisions regarding sale of the company or IPO

12. Board Composition: Structure and appointment rights for the board of directors

13. Confidentiality: Obligations regarding confidential information

14. Notices: Process for formal communications between parties

15. Governing Law and Jurisdiction: Specification of German law application and jurisdiction

What sections are optional to include in a Startup Investment Agreement?

1. Founder Vesting: Include when founders' shares need to be subject to vesting schedules

2. Technology Assignment: Include for technology-focused startups to ensure IP ownership

3. Employee Stock Option Pool: Include if an ESOP is being established or maintained

4. Strategic Investor Rights: Include for strategic investors requiring specific commercial rights

5. Competition and Non-Solicitation: Include when requiring non-compete obligations

6. Liquidation Preference: Include for preferred share investments with specific liquidation rights

7. Tag-Along and Drag-Along Rights: Include when specific exit mechanisms are required

What schedules should be included in a Startup Investment Agreement?

1. Cap Table: Current and post-investment shareholding structure

2. Business Plan: Company's business plan and financial projections

3. Warranty Schedule: Detailed warranties given by the company and founders

4. Articles of Association: New or amended articles reflecting the investment

5. Shareholders' Agreement: Agreement governing relationships between shareholders

6. Key Performance Indicators: Specific metrics for monitoring company performance

7. Intellectual Property Register: List of company's IP assets and registrations

8. Material Contracts: List of significant commercial agreements

9. Due Diligence Findings: Summary of key due diligence results

10. Closing Checklist: List of documents and actions required for closing

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Germany

Publisher

Ƶ

Cost

Free to use

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