د پیل کولو اصطلاح پاڼه: هغه څه چې د هالنډي قانون لاندې د ارزښت څخه هاخوا مهم دي

A startup term sheet records the proposed terms of an investment before the definitive documents are drafted, and under Dutch law it is largely non-binding. The exceptions are the clauses that are expressly made binding on signature, usually exclusivity, confidentiality and costs, and breaking off advanced negotiations can still make you liable for the other side’s costs.

The valuation is rarely the number that decides who gets paid. Liquidation preference, anti-dilution, founder vesting, reserved matters and board composition do that. In a Dutch private limited company (besloten vennootschap, bv) each of those terms has to be built into the articles of association and the shareholders’ agreement under Book 2 of the Dutch Civil Code (BW), which changes how familiar Anglo-American clauses work here.

Is a term sheet binding under Dutch law?

Mostly not: the investment itself only becomes binding when the deed of issue, the amended articles and the shareholders’ agreement are signed. A term sheet normally states in so many words that neither party is obliged to complete the deal, and Dutch courts respect that statement.

A term sheet, sometimes called a letter of intent, records the amount invested, the pre-money valuation, the share class the investor takes, and the economic and control terms. Each of those terms later returns in three documents: the notarial deed of issue, the amended articles of association and the shareholders’ agreement.

Which clauses bind you immediately?

Three provisions are usually binding on signature. The first is exclusivity (a no-shop): for a fixed period, for example 60 days, you may not negotiate with other investors. Keep that period short, define what counts as soliciting, and make exclusivity end automatically if the investor withdraws or materially changes the terms.

The second is confidentiality, which usually runs both ways and covers the negotiations themselves as well as the information exchanged. The third is costs: who pays the legal and due diligence costs if the deal completes, and who pays if it does not. Put a euro cap on those costs in the term sheet itself.

Can you walk away without consequences?

Not always. Parties negotiating a contract must act according to reasonableness and fairness, and under Dutch Supreme Court case law breaking off negotiations can be unacceptable when the other party could justifiably trust that a contract would follow. In that case the party that withdrew may have to pay the other party’s costs and, exceptionally, lost profit.

The further negotiations have advanced, the harder it becomes to withdraw for reasons that look opportunistic. Record in the term sheet which conditions still apply, such as satisfactory due diligence, investment committee approval and signed definitive documents, so that a withdrawal rests on an agreed condition rather than a change of mind.

Liquidation preference: who gets paid first on an exit?

A liquidation preference decides the order and size of payouts when the company is sold or wound up. A 1x non-participating preference means the investor receives at least the amount invested before ordinary shareholders receive anything.

A Dutch bv has no preference share by default; it has to be created. Under Article 2:201 BW all shares carry equal rights in proportion to their nominal amount unless the articles provide otherwise, so the articles can create a class of preference shares that ranks first in a distribution. Many deals reach the same result through a waterfall in the shareholders’ agreement. Changing the articles needs a notarial deed and a shareholders’ resolution; changing the agreement needs the consent of its parties.

What is the difference between participating and non-participating?

With a non-participating preference the investor chooses: either the preference amount, or conversion and a share of the proceeds pro rata. With a participating preference the investor takes the preference amount first and then also shares in the rest, which is often called double dipping.

An example to illustrate: an investor pays €2 million for 20% of the company, which is later sold for €10 million. With a 1x non-participating preference the investor receives €2 million either way, leaving €8 million for the others. With a 1x participating preference the investor takes €2 million plus 20% of the remaining €8 million, a total of €3.6 million, and only €6.4 million is left for founders and team.

The multiple matters as much as participation. A 2x preference doubles the amount that comes off the top and can absorb the entire proceeds of a modest sale. If an investor insists on participation, the usual compromise is a cap, for example participation ends once the investor has received 3x the amount invested.

How do preferences stack across rounds?

Each new round adds its own preference, and the term sheet says whether the new investor ranks ahead of earlier investors (stacked) or alongside them (pari passu). By a Series B round, total preferences can exceed the sale price in a weak exit, leaving ordinary shareholders with nothing.

Anti-dilution: what happens in a down round?

Anti-dilution compensates an earlier investor when a later round is priced lower per share, by adjusting their conversion price or issuing extra shares. It does not apply to a round priced higher, which dilutes everyone in the normal way.

Broad-based weighted average is the market standard. It recalculates the earlier price using all outstanding shares and the number of new shares actually issued at the lower price, so a small down round produces a small adjustment. Full ratchet resets the investor’s entire holding to the new, lower price, however few shares are issued at that price, and should be traded away.

Anti-dilution should not be triggered by issues everyone agreed to in advance: shares issued under the employee option pool, on the exercise of existing options or convertible loans, in an acquisition, or to a bank. List those carve-outs in the term sheet.

How does founder vesting work in a Dutch bv?

Vesting ties a founder’s shares to continued involvement; the market standard is four years with a one-year cliff. Because a founder owns the shares from day one, Dutch law achieves vesting through an obligation to offer shares back, not through forfeiture.

Under Article 2:196 BW the issue and transfer of shares in a bv requires a deed executed before a civil-law notary established in the Netherlands. Article 2:192 BW lets the articles of association oblige a shareholder to offer and transfer shares in described circumstances, such as leaving the company. Under Article 2:192(3) BW the price is the value set by independent experts, unless the articles set a different price mechanism that the shareholder has accepted.

Good leaver or bad leaver: what price applies?

A good leaver, for example someone who leaves through illness or is dismissed without fault, usually offers unvested shares at market value. A bad leaver, for example someone who resigns within the cliff or is dismissed for an urgent reason (dringende reden), usually offers them at nominal value.

Check two points. A clause that treats every voluntary departure as bad leaver, however long the founder served, is harsh and negotiable. And a founder who is also an employee has Dutch employment protection, so align the leaver definitions with the employment contract; otherwise a founder can win a dismissal case and still lose the shares.

What happens to unvested shares on a sale?

Single-trigger acceleration vests everything on the sale itself. Double-trigger acceleration needs a second event, usually dismissal by the buyer within an agreed period, for example 12 months, after the sale, and is the more common and defensible position.

Reserved matters: which decisions need investor consent?

Reserved matters are decisions the company may not take without the consent of the investor or a majority of preference shareholders. They are the control side of the deal and outlast the valuation discussion.

A typical list covers a sale, merger or liquidation, new share issues, amendments to the articles, distributions, borrowing or capital expenditure above a threshold, security over assets, related-party transactions and the annual budget. Under Article 2:239(3) BW the articles can make management board resolutions subject to the approval of another corporate body. A resolution taken without that approval is defective under company law, while breach of a purely contractual veto only gives a damages claim.

Three techniques keep the list workable: euro thresholds for financial items, consent by a majority of preference shareholders rather than one named investor, and deemed consent if no reply follows within, for example, ten business days.

Board seats: what does an investor director actually control?

A Dutch bv always has a management board (bestuur) and has a supervisory board (raad van commissarissen) only if the articles create one; a one-tier board is also possible. An investor therefore takes a supervisory seat, a non-executive seat or an observer seat without a vote.

Under Article 2:239(5) BW every director must act in the interest of the company and its business, not of the shareholder who nominated them. Under Article 2:239(6) BW a director with a conflicting personal interest may not take part in the decision; if no board decision is then possible, the supervisory board or the general meeting decides. Real investor control therefore sits in the reserved matters, exercised at shareholder level. If that balance breaks down, see our article on په هالنډ کې د ونډه لرونکو شخړې.

Which share structures does Dutch law allow?

A bv can issue non-voting shares (Article 2:228(5) BW) and shares without, or with limited, profit rights (Article 2:216(7) BW), but one share cannot lack both. That flexibility is useful for employee and family holdings.

The alternative is a foundation that holds the shares and issues depositary receipts (stichting administratiekantoor, STAK). The foundation votes; the receipt holders hold the economic rights. Many Dutch startups use a STAK for employee participation, so that a growing number of small holders does not complicate every shareholder resolution.

How do drag-along, tag-along and transfer restrictions work?

A drag-along lets an agreed majority force the remaining shareholders to sell on the same terms; a tag-along lets the minority join a sale by the majority. Both sit on top of the statutory transfer rules in Article 2:195 BW.

Unless the articles provide otherwise, Article 2:195 BW requires a selling shareholder to offer shares to the other shareholders first, at a value set by independent experts. The articles may restrict transfers in another way, but the restriction must still let a shareholder who wants to sell actually sell. Align the articles, the shareholders’ agreement and the term sheet; conflicting transfer clauses are a common reason an exit stalls.

A redemption right, under which the company must buy back an investor’s shares after a period, is limited by Article 2:207 BW: the bv may not buy back shares if its equity falls below the required reserves or if the board knows the company could not keep paying its debts afterwards.

What happens between term sheet and completion?

The investor will want warranties from the company and usually a limited set from the founders on title to shares, intellectual property, accounts, liabilities and key contracts. The term sheet should set who gives them, the cap on founder liability and the period within which claims can be made, for example 18 months.

Specific disclosure in a disclosure letter limits warranty claims, so start that work early. Completion takes place before a civil-law notary, who executes the deed of issue and, where needed, the deed amending the articles (Article 2:196 BW); the board then updates the shareholders’ register under Article 2:194 BW.

د یو بنسټ ایښودونکي په توګه تاسو باید څه وګورئ؟

• Model a waterfall at three sale prices (for example €5 million, €15 million and €50 million) with the proposed preference and with your own proposal.
• Check whether the preference is 1x non-participating and whether later rounds will rank pari passu.
• Check whether the pre-money valuation includes an enlarged option pool, which dilutes only the existing shareholders.
• Read the leaver definitions next to your employment or management agreement.
• Check the exclusivity period, the cost cap and the deemed-consent period for reserved matters.
• Have the tax treatment of founder and employee shares checked by a tax adviser before the structure is fixed.

What should you check as an investor?

• Check that the preference and reserved matters are anchored in the articles (Articles 2:201 and 2:239(3) BW), not only in a contract.
• Check that vesting is implemented as a transfer obligation under Article 2:192 BW with an agreed price mechanism.
• Check the shareholders’ register and earlier notarial deeds of issue, so the cap table is legally correct.
• Check that IP created by founders and developers has been assigned to the bv in writing.
• Check whether existing transfer restrictions and drag-along clauses allow a 100% sale.

What can we do for you with a startup term sheet?

زموږ د یوې برخې په توګه د سوداګرۍ قانون تمرین او زموږ د نوي شرکتونو لپاره قانوني مشوره, we act for founders, companies and investors:

• We review a term sheet and mark which terms are market and which are not.
• We negotiate liquidation preference, anti-dilution, vesting and reserved matters with the other side.
• We draft the shareholders’ agreement and the amended articles of association and coordinate with the notary.
• We set up founder vesting and employee participation, including a STAK where useful.
• We prepare the disclosure letter and limit founder warranties.

زموږ د نوي پیل تمویل دورې لپاره قانوني چک لیست covers the documents that follow the term sheet, and our article on how په هالنډ کې نوي شرکتونه او پانګه اچوونکي د فکري ملکیت ساتنه کوي covers the IP side. For tactics, see our note on د تړون د خبرو اترو ستراتیژۍ.

لنډیز

• A Dutch term sheet is largely non-binding, except clauses such as exclusivity, confidentiality and costs; breaking off advanced negotiations can still create liability.
• Liquidation preference and anti-dilution decide the payout more than the valuation; aim for 1x non-participating and broad-based weighted average.
• Vesting in a bv works through a transfer obligation in the articles (Article 2:192 BW) and a notarial deed (Article 2:196 BW).
• Reserved matters in the articles (Article 2:239(3) BW) carry more weight than an investor board seat.
• Transfer restrictions (Article 2:195 BW) and buy-back limits (Article 2:207 BW) shape every exit.

ډېرپېښې پوښتنې