ARGENTINA Law and Practice Contributed by: Manuel Tanoira, Lucía Rivas O’Connor, Luis Merello Bas and Dolores Nazar, TCA Tanoira Cassagne
5.4 Implementation Series A rounds often allocate 10% of equity for employee pools, demanded by investors to keep teams driven. Investors generally request this allocation, as they want to ensure that the key team (founders and employees) is incentivised to achieve future goals. This percentage may vary depending on the round and the specific agree - ment, but 10% is the most common. The equity incentive pool is typically estab - lished before or within the framework of the investment round. During the investment round, the terms of the pool are negotiated, and it is crucial for investors to avoid dilution from this equity allocation. In this context, if the incen - tive plan is agreed upon before the investment round, Series A investors often request that the percentage be deducted from the pre-money valuation to ensure they are not diluted by the incentive programme. However, in the case of SAFEs, investors are not diluted because the equity percentage is set post-investment round. On the other hand, if there are future investment rounds, the expansion of the employee pool may dilute both founders and existing investors, as these pools typically increase as the company grows and needs more incentives to attract and retain key talent.
Argentina’s rare liquidity events. For this reason, some adjustments may have been made to the market practice, but overall, the investor pro - tections and exit rights tend to align with global standards in venture capital. The standard transfer restrictions usually apply to ensure that shareholders cannot transfer their shares without offering the opportunity to the other shareholders to buy them first (right of first refusal). Exit triggers are commonly defined in terms of an IPO, a trade sale or a liquidation event, typically outlining the conditions under which these events can occur and the rights of investors and founders. 6.2 IPO Exits In Latin America, IPOs are very rare, and the number of IPOs and exits has decreased con - siderably in recent years. This is mainly due to economic instability, volatile markets and the lack of available capital. The M&A sector and exits are seeing limited activity and IPOs are even less common, while the trend has been towards more early-stage exits rather than IPOs. For timeline considera - tions, early-stage and growth-stage exits are common, where companies are still scaling but have reached a point where an acquisition by a larger company can accelerate growth or pro - vide strategic benefits. For example, large tech companies have previously acquired early-stage tech teams that implemented salesforce solu - tions. The need for rapid integration of technol - ogy teams has driven this trend, as companies sought to expand their global network, espe - cially when the exchange rate was favourable. When it comes to listing venues and offering structures, in Latin America, companies typically
6. Exits 6.1 Investor Exit Rights Exit Strategies and Liquidity Shareholder rights in exits
Exit terms in Argentina echo National Venture Capital Association (NVCA) norms, featuring tag- along and drag-along rights, plus first refusal on share transfers. Triggers like IPOs, trade sales or liquidations define exit paths, adjusted for
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