ARGENTINA Law and Practice Contributed by: Manuel Tanoira, Lucía Rivas O’Connor, Luis Merello Bas and Dolores Nazar, TCA Tanoira Cassagne
to investors. Some companies may also use pre-money or post-money SAFE structures, with the latter being more common. • Term sheet: The term sheet outlines the pri - mary terms and conditions of the financing, including the investment amount, the type of securities issued (such as preferred or com - mon stock), and key investor rights such as liquidation preferences or voting rights. • Shareholders’ agreement: This agreement governs the relationship between the com - pany’s shareholders and contains provisions like anti-dilution rights, tag-along rights, drag- along rights and exit clauses. It also specifies the governance structure of the company. • Investment agreement: This formal agree - ment details the terms of the investment, confirming the investor’s commitment and the number of shares or securities to be issued, as well as any conditions precedent to the investment. • Subscription agreement: The subscription agreement is used when an investor sub - scribes for shares in the company. It for - malises the investment commitment and is typically executed alongside the investment agreement. • Investment framework agreement: In some cases, an Acuerdo Marco de Inversión (Investment Framework Agreement) is used, especially when a holding company is involved, or when irrevocable capital con - tributions are required. This agreement sets out the general terms and conditions of the investment, and may also involve a swap mechanism or the issuance of preferred shares in the local operating company. 3.5 Investor Safeguards Safeguards in Downside Scenarios The market has shifted significantly since the boom years of 2020–2021, when many start-ups
raised large amounts of capital in a liquidity-driv - en market. However, after the “bubble” burst, valuations have deflated, leading to more cau - tious investment strategies. In this new environ - ment, investors focus heavily on provisions that protect their positions in scenarios where future funding may be at lower valuations. The inclu - sion of anti-dilution clauses, MFN and pro-rata rights has become more prevalent as investors seek to protect their capital. The down rounds have become more common due to these market shifts, and the increased caution and valuation adjustments reflect the industry’s response to this new reality. The inclusion of a target date in investment agreements is another key tool used by inves - tors, particularly due to the lack of liquidity in the industry. A target date allows the investor to eventually convert their investment, ensur - ing they have the option to participate in future decisions of the company. This is typically at the discretion of the investor and gives them the flexibility to incorporate themselves into the company’s decision-making process. Strategic investors, particularly Corporate Venture Capital (CVC) funds, may also include observer rights in their agreements, allowing them to attend board meetings without hav - ing a formal seat. These investors often avoid appointing directors to retain a less intrusive role, but they seek to be involved in the compa - ny’s strategy and development. Such rights are commonly included in side letters, rather than in the main investment documents, to ensure they do not complicate the primary investment agreement. In tough times, investors secure protections. Discounts tied to valuation caps ensure cheap -
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