Core Viewpoint - The article discusses the practical issues and solutions regarding the protection of existing shareholders' rights during subsequent financing rounds of invested companies, focusing on the review of transaction documents by existing shareholders [2]. Group 1: Key Points on Shareholder Agreement - The Shareholders Agreement (SHA) is a comprehensive document that outlines special rights, corporate governance, commitments, and obligations of shareholders, often including performance commitments, valuation adjustments, and rights such as preemptive rights and anti-dilution rights [3]. - Existing shareholders need to pay attention to the effectiveness of the new shareholder agreement, particularly whether it fully encompasses all special rights obtained during their initial investment and whether it includes any adjustments that may diminish their rights [4][5]. - If the new shareholder agreement replaces the old one, existing shareholders must ensure that all their rights are preserved; otherwise, unincorporated rights may not be protected [4][5]. Group 2: Common Changes in Rights Due to New Shareholder Agreement - Adjustments to repurchase rights may include changes in the order of repayment, the circumstances triggering repurchase, and the calculation of repurchase price, which could negatively impact existing shareholders [8][9]. - The introduction of new investors may lead to more favorable rights for them, such as enhanced repurchase rights or priority in liquidation, which existing shareholders must evaluate and potentially negotiate [8][13]. - Changes in the rights to appoint directors or access information may also occur, often based on the proportion of shares held, which existing shareholders should scrutinize [14]. Group 3: Key Points on Capital Increase Agreement - The Share Purchase Agreement (SPA) outlines the specific arrangements for capital increases, including conditions for closing and representations made by the invested company [15][16]. - Existing shareholders should ensure that the SPA does not impose unreasonable obligations on them, such as commitments that deviate from customary practices or that increase their liabilities [17]. Group 4: Key Points on Revised Company Articles - The revised company articles must align with the actual circumstances of the financing, ensuring that all necessary provisions are included and consistent with the shareholder agreement [18][19]. - Attention should be given to the provisions regarding the loss of rights due to overdue contributions, ensuring there are no conflicts with the capital increase agreement [20]. Group 5: Interconnection of Agreements - It is crucial for existing shareholders to ensure that the shareholder agreement, capital increase agreement, and company articles are consistent and do not contain conflicting provisions, which could lead to disputes over applicability and effectiveness [21].

Core Viewpoint - The article discusses the various factors that influence the repurchase price in equity buyback agreements, highlighting the negotiation process between investors and target companies. Group 1: Factors Influencing Repurchase Price - Original investment amount is a primary basis for determining the repurchase price [1] - Fixed or floating return rates may be included to compensate investors for their capital costs and expected returns [1] - The duration of equity holding can affect the repurchase price, with longer holding periods potentially leading to higher prices [1] - Performance targets achieved by the target company may lead to adjustments in the repurchase price [1] - Market conditions and the target company's market performance can also influence the determination of the repurchase price [1] - Third-party evaluations from independent assessment agencies may be used to establish the repurchase price [1] - If the investor holds preferred shares, the repurchase price may include terms related to liquidation preferences [1] - Dividends received during the holding period may be deducted from the repurchase price [1] - Other contractual terms, such as most-favored-nation clauses and tag-along rights, can impact the determination of the repurchase price [1][2] - The final repurchase price is the result of negotiations between the parties, potentially involving legal advisors' expertise [2]

Core Viewpoint - The article discusses the "last in, first out" principle in multi-round financing, where later investors typically have a higher priority for repayment compared to earlier investors, based on the increasing valuation of the company with each financing round [3]. Group 1: Basic Principles - The "last in, first out" principle allows later investors to demand higher priority in repayment due to their investment at higher valuations, which compensates for similar risks faced by earlier investors [3]. - In the event of liquidation, later investors, such as those in the C round, have the right to be repaid before earlier investors from the A and B rounds [3]. Group 2: Types of Liquidation Events and Repayment Order - Liquidation events are categorized into statutory liquidation and deemed liquidation, with different repayment orders applicable [4]. - Statutory liquidation includes scenarios like bankruptcy, where repayment follows legal priority, ensuring that liquidation costs and employee wages are paid first, followed by debts, before any distribution to shareholders [4]. - Deemed liquidation events, such as mergers or acquisitions, are critical for investors as they directly affect exit strategies and return expectations, with repayment rights being strictly enforced [5]. Group 3: Specific Clause Designs for Repayment Order - Repayment priority can be structured in two main forms: fixed multiple priority and participation rights clauses [6]. - Fixed multiple priority allows later investors to recover their investment amount plus a premium, ensuring they are prioritized in repayment [7]. - Participation rights clauses enable later investors to participate in the distribution of remaining assets after their priority amount is satisfied, providing a potential for dual returns [8]. Group 4: Exceptions and Special Cases - While "last in, first out" is the general principle, exceptions can occur, such as when earlier investors have shorter buyback periods or when later investors acquire old shares, which may affect their repayment order [9]. - Specific agreements in financing contracts can also alter the repayment order, allowing for equal priority among all investors or specific distribution ratios [9]. Group 5: Legal Framework and Liquidation Procedures - The liquidation process requires adherence to legal procedures for asset management and distribution, ensuring that statutory obligations are met before any shareholder distributions [10]. - If priority repayment clauses are included in financing agreements, they must be considered in the liquidation plan to protect investors' rights [10]. Group 6: Strategies for Later Investors in Liquidation Events - Later investors can pursue legal remedies to assert their rights if they are not repaid due to insufficient assets or flaws in repayment clause designs [13]. - Options include litigation or arbitration to confirm the validity of priority repayment clauses and to challenge any improper actions by the liquidation team or controlling shareholders [14][15]. - Negotiation strategies such as debt restructuring or asset swaps can also be employed to achieve partial repayment [16][17]. Group 7: Preventive Measures for Optimizing Financing Agreement Clauses - Implementing "liquidation threshold" clauses can ensure that later investors receive priority repayment when remaining assets fall below a certain level [20]. - Introducing buyback or redemption rights can provide exit options for later investors outside of liquidation scenarios, reducing reliance on such events [21][22]. - Clearly defining "deemed liquidation events" in agreements can ensure that later investors' repayment rights are triggered appropriately during significant corporate changes [23].