ARGENTINA Law and Practice Contributed by: Manuel Tanoira, Lucía Rivas O’Connor, Luis Merello Bas and Dolores Nazar, TCA Tanoira Cassagne
er shares in future rounds. Anti-dilution claus - es guard against value drops in down rounds, while pro rata rights let investors maintain their stake. “Most favoured nation” clauses lock in the best future terms, and put/call options offer exit flexibility. Target dates in agreements pro - vide conversion options, which given the current landscape of restricted liquidity, it is especially critical. As the market has evolved, these terms have become more prevalent and essential in the negotiation process. 3.6 Corporate Governance Investor Influence on Management and Governance Investors gain more control as the start-up matures. In early-stage ventures, the influence that investors have over management and the company’s affairs varies depending on the type of investor involved. However, there are some standard rights that typically apply, especially as the company matures and goes through rounds like Series A. Before a company reaches a Series A financing round, investors may secure “observer rights” . This gives them the ability to attend board meet - ings and observe the company’s operations without having a formal vote or decision-making power. This is especially common for early-stage investors, like angel investors or smaller venture funds, which want to keep track of the compa - ny’s progress. Once the company raises a Series A round, the lead investor typically negotiates for the right to appoint a director to the board of the company. This provides the investor with more direct influ - ence over the company’s decisions, strategies and operations. The lead investor’s involvement
can significantly impact governance, and often, their appointed director has a key say in major decisions. Additionally, the inclusion of “protective provi- sions” in the investment agreement grants inves - tors veto power or special rights pertaining to specific actions the company may take, includ - ing raising additional financing, selling the com - pany, or implementing significant operational changes. Protective provisions are designed to safeguard the investors’ interests, ensuring they have a say in critical matters even if they do not have a controlling stake. The influence of CVC investors is typically more pronounced due to their dual role as investors and strategic partners. CVCs often aim to create synergies with the start-up beyond mere finan - cial investment, and they may engage in com - mercial agreements or strategic alliances that go beyond the typical investment contract. These strategic collaborations might include opening new business lines or providing operational sup - port, thus becoming more deeply involved in the company’s operations. Overall, the level of influence an investor has is directly correlated with their investment’s size, their role in the financing round (eg, lead inves - tor) and the strategic value they bring to the table. The company’s founders also play a role in defining the relationship, as they may request specific support from investors in areas beyond just capital. 3.7 Contractual Protection Representations, Warranties, Covenants and Recourse in a Financing Round Financing deals include assurances from both sides. Companies confirm their structure, IP ownership, employee status and lack of legal
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