Shareholder Agreement Best Practices

Anti-dilution economic provisions protect investors from „bearish cycles,“ the risk of new shares issued by the company at a lower price than the investor. If future capital increases are carried out at higher valuations, it is unlikely that anti-dilution provisions will be triggered. Dilution protection clauses exist to protect outside investors and are often to the detriment of founders, previously unprotected outside investors or other shareholders. They are not ideal for non-beneficiaries of anti-dilution provisions, but the reality is that most serious and experienced investors will expect protection against dilution. For example, an „investment schedule“ may provide that stocks are unwavering over a 4-year period on a monthly basis. As a rule, there is an initial „pitfall“ in which a shareholder has a minimum duration (z.B. 1 year) must remain in the company, otherwise he will lose his rights to all shares. Assuming a standard lock-up period of four years, 25% of the shares will therefore automatically become unshakable after the first year, with the remaining shares being unshakable in monthly packages of 1/46 of the total shares over the next 3 years. [3] A shareholder loan is generally a form of debt financing by shareholders. These are usually the most promising debt securities issued by a company.

Since it is subordinated to other priority loans, other more „priority“ creditors therefore have priority rights over the repayment of the debt owed by the company. Shareholder loans can also have long maturities with low or deferred interest payments.