CHILE Law and Practice Contributed by: Francisco Barreda, Barreda Legal Tech
play” clauses, which require investors to par - ticipate in future rounds if they wish to retain certain privileges (such as preferential rights or anti-dilution), have also been strengthened. However, these clauses are also used in more advanced rounds and are rarely included in SAFE agreements. 3.6 Corporate Governance Early-stage investors generally are not involved in the management of the company. However, in more advanced stages (Seed-Series A and beyond), while investors typically do not engage in the day-to-day operations of the start-ups, they do seek to ensure a significant level of con - trol and influence over the company’s strategic and structural decisions through contractual clauses and corporate governance structures. Some of the most common rights that are nego - tiated include: • Board Member Appointment: This allows investors to have direct visibility into man - agement, access relevant information, and participate in key decisions. In some cases, it is agreed that certain decisions can only be approved with the favourable vote of the director appointed by the fund (veto right). • Veto Rights on Strategic Matters: Through the shareholders’ agreement (sometimes incorporated into the company’s by-laws), investors often establish that certain matters require their prior consent, such as capital increases, sale of significant assets (in Chile, a shareholders’ meeting is also required to approve sales representing more than 50% of the company’s assets), debt exceeding certain amounts, changes to the corporate purpose or structure, issuance of new shares or convertible securities, amendments to the by-laws, among others.
• Access to Information: Investors usually include clauses granting them the right to receive periodic (monthly, quarterly, annual) updates on the financial, operational, and commercial status of the company. This is commonly included from early stages. It is also common to find clauses that grant the investor the right to audit or review financial statements and accounting records. Once they hold a seat on the board, the investor gains permanent access to such information. 3.7 Contractual Protection Early Stage Generally, in SAFE agreements (commonly used in early-stage investments), the investor makes general representations such as having the legal capacity, understanding the investment’s pur - pose, and acknowledging the risks involved. The start-up typically declares that it is duly incorporated, in good standing, and in compli - ance with the laws of its jurisdiction, and that it has the necessary legal capacity to enter into and execute the SAFE agreement. It affirms that the instrument has been validly authorised by its competent corporate bodies and does not con - travene any relevant laws, contracts, or active authorisations. The start-up also declares that executing the contract does not create conflicts or adversely affect its assets, operations, or essential licences. Finally, the company states that it possesses the necessary intellectual property rights for the development of its busi - ness, without infringing third-party rights. Later Stages (especially Series A and beyond) Typically, in capital increases, subscription agreements (post-capital increase), and/or shareholders’ agreements, the following condi - tions are included:
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