ARGENTINA Law and Practice Contributed by: Manuel Tanoira, Lucía Rivas O’Connor, Luis Merello Bas and Dolores Nazar, TCA Tanoira Cassagne
roeconomic challenges have led to a decrease in government-driven investment initiatives. As a result, Argentina competes with other regional markets that have more developed financing tools, even though it maintains one of the most dynamic and innovative start-up eco - systems globally. Apart from the programmes already mentioned in this chapter, there are very few government or quasi-government initiatives in Argentina specif - ically designed to incentivise equity financing for growth companies. Most existing programmes provide limited fiscal benefits or non-financial support, without deploying significant capital. However, the private sector and international VC funds are increasingly stepping in, recognising the potential and strong entrepreneurial talent emerging from Argentina’s ecosystem. 4.3 Government Endorsement Efforts to Boost Equity Financing
Securing the long-term commitment of founders and key employees is crucial for the success of growth companies and start-ups. Several mech - anisms are commonly employed to ensure that founders and key employees remain dedicated to the venture. • Founder vesting agreement: A vesting agree - ment is the most widely used tool to ensure that founders stay committed over time. Typically, a four-year vesting schedule with a one-year cliff is implemented. This means the founder’s equity is earned gradually over a four-year period, and if they leave before the one-year mark, they forfeit any unvested equity. The vesting agreement is structured to prevent founders from leaving early and tak - ing equity with them while encouraging them to contribute to the company’s long-term success. • Equity incentive plans: Equity incentives are also used to reward and retain key employ - ees, often in the form of stock options, restricted stock units or phantom stock. These options allow employees to buy shares at a discounted rate or grant them stock at a later date, which can significantly increase their motivation to contribute to the compa - ny’s success. Vesting schedules are similarly applied to these equity incentives, ensuring that employees remain with the company for a longer period before they can realise the full value of their compensation. • Earn-out agreements: For founders or key employees, especially in cases of acquisitions or company exits, an earn-out structure may be used. This requires key individuals to meet performance milestones post-sale or acquisi - tion in order to receive additional compensa - tion. It aligns their interests with the long-term growth of the company, encouraging them
5. Employment Incentives 5.1 General Founders and Key Employees Ensuring long-term dedication
Keeping founders and key staff committed is vital in Argentina’s start-ups. Vesting agree - ments, typically for a period of four years with a one-year cliff, tie, founders’ equity to their time and dedication with the company. Equity incen - tives like stock options or restricted stock units, motivate employees. Earn-outs in exits, perfor - mance bonuses, non-compete clauses and a shared company vision further build loyalty, mix - ing financial incentives with cultural connections.
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