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A Pro-rata side letter to Investment agreement gives existing investors the right to maintain their ownership percentage in future funding rounds of a Danish company. It's a key document that protects investors from dilution when new shares are issued, ensuring they can participate in subsequent investment rounds on the same terms as new investors.

Under Danish corporate law, these letters work alongside the main investment agreement and are particularly common in venture capital deals. They help create trust between companies and early investors by guaranteeing fair treatment in future fundraising, while still allowing flexibility in how the business grows and takes on new capital.

Use a Pro-rata side letter to Investment agreement when bringing in early investors who need guaranteed access to future funding rounds. This is especially valuable for Danish startups planning multiple investment phases, where keeping early supporters engaged is crucial. The letter becomes essential when initial investors express concerns about potential dilution of their ownership stake.

It's particularly important to implement these letters during Series A rounds in Denmark, where subsequent funding is likely. Many Danish venture capital firms and angel investors actively seek these rights to protect their long-term interests. The timing matters - adding pro-rata rights after later funding rounds becomes much more complicated and can create conflicts with existing shareholders.

• Basic Pro-rata Rights: Most common version that gives investors the right to maintain their ownership percentage in future rounds, typically with no special conditions
• Capped Pro-rata: Limits the investor's participation right to a specific investment amount or percentage, popular among Danish growth companies
• Qualified Pro-rata: Only activates these rights when certain conditions are met, like minimum investment thresholds or specific funding round types
• Time-Limited Pro-rata: Sets an expiration date on the pro-rata rights, often tied to specific funding rounds or company milestones
• Enhanced Pro-rata: Includes additional rights like information access or board observation rights alongside standard pro-rata provisions

• Early-Stage Investors: Usually venture capital firms or angel investors who want to protect their future investment rights in Danish startups
• Startup Founders: Company leaders who negotiate and sign these letters to secure initial investment while managing future funding flexibility
• Corporate Lawyers: Danish legal professionals who draft and review the letters to ensure compliance with local investment regulations
• Board Members: Company directors who must approve and oversee the implementation of pro-rata rights
• Investment Advisors: Financial experts who help structure deals and explain implications of pro-rata rights to all parties

• Investment Details: Gather exact ownership percentages, share classes, and investment amounts from the original agreement
• Future Round Terms: Define which future funding rounds trigger pro-rata rights and any participation caps
• Timeline Parameters: Set clear deadlines for exercising pro-rata rights and notification requirements
• Company Information: Collect current capitalization table and Danish corporate registration details
• Stakeholder Approval: Confirm board authorization and existing shareholder agreement compatibility
• Documentation Platform: Use our automated system to generate a legally compliant pro-rata side letter that includes all required Danish legal elements

• Parties and Roles: Full legal names and registration numbers of the company and investor(s)
• Pro-rata Rights: Clear definition of participation rights and calculation method for future rounds
• Notice Requirements: Specific timeframes and procedures for informing investors of new funding rounds
• Exercise Mechanics: Detailed process for exercising pro-rata rights and payment terms
• Term and Duration: Explicit statement of when rights begin and end under Danish law
• Governing Law: Reference to Danish corporate law and jurisdiction for dispute resolution
• Integration Clause: Connection to main investment agreement and any existing shareholder agreements

A Pro-rata side letter to Investment agreement is often confused with the main Investment Agreement, but they serve distinct purposes in Danish corporate law. While both documents deal with investment terms, their scope and application differ significantly.

• Purpose and Scope: Pro-rata side letters focus specifically on future investment rights, while Investment Agreements cover the entire investment relationship, including valuation, share classes, and voting rights
• Timing of Effect: Pro-rata rights typically activate in future funding rounds, whereas Investment Agreements govern immediate investment terms
• Document Structure: Side letters are shorter, focused documents that supplement the main agreement, while Investment Agreements are comprehensive standalone contracts
• Flexibility: Pro-rata side letters can be modified or terminated without affecting the main investment terms, making them more adaptable to changing circumstances