Syndicate agreement / Investor agreement

The syndicate agreement is an agreement between the founders and the investors. The contract contains the details of the transformation and further operation of the new, jointly established company or the existing company.

The syndicate agreement is the declaration of intent of the parties involved in the founding or transformation of the startup business. The contract contains how the parties would like to cooperate after the transaction, what expectations they have of each other, what rights they have and what obligations they assume.

A syndicate agreement concluded during venture capital investments may be connected to the creation of a new company or to the transformation of the ownership structure or company form of the existing company. In many countries, the syndicate contract does not have a specific legal background or a fixed system of conditions, so it is flexible and can be applied widely, and the criteria agreed upon by the parties can be freely formulated.

In Anglo-Saxon law, the term syndicate agreement is used when several investors appear together in a transaction. In continental law, however, in general, the contract created between the investor and the target company during venture capital investment is called this, regardless of how many founders and how many investors participate in the transaction.

The syndicate contract does not have a fixed form or mandatory content elements. It is an important point that the contract does not only list the business goals and assets, but also the sanctions that can be imposed on the participant who does not fulfill his obligations. The syndicate agreement is usually not for a fixed period, but is tied to the fulfillment of certain conditions, for example in the event of a company sale, acquisition or termination.

If it is concluded before the foundation of the new company, it practically functions as a pre-contract. In this case, the parties can also grant themselves additional rights. This can be the case, for example, if the founder or one of the investors is decisive, has priority in liquidation, or even has the right of veto, even with a minority share, other than the capital ratio.

Restrictions on the transfer of shares can also be regulated in the in syndicate agreements. An example of this is co-selling obligation, which states that if the majority of the owners want to sell their share, then the minority owner must also sell their share.

There are also solutions where it is regulated in this contract that a party's intellectual property, patent, or protected trademark is also brought into the joint venture. In contrast to a company agreement, the syndicate agreement is not public, so it may also contain business secrets. Here, the parties can also provide for special matters, but the provisions of the in syndicate agreements cannot conflict with the company agreement, because in the event of a discrepancy, the latter would be valid.