We have some great news to share. Since the summer of 2023 we have worked together with the tech transfer office’s (TTO’s) of some of the most prominent universities in the Netherlands on a new Shareholders Agreement that can be used by Dutch university spin-offs in which universities will participate as a shareholder.
The goal of this project was to make the equity part of the spin-off process more smooth. Discussions between TTO’s and scientific teams that want to start their own company based on scientific work done at the university can be long and painful. A lot of these discussions are usually around intellectual property. For this, last year the universities laid down transparent principles for the transfer of intellectual property to academic spin-offs that can be helpful in many cases (https://www.science-to-impact.nl/en/highlights/dealterms).
If universities take equity positions in a spin-off, there are also other arrangements to be made between the academic team, the spin-off and the university. Here’s where Capital Waters steps in. It safes all parties time and money if a well balanced standard shareholders agreement is available that can be used to facilitate this process. Therefore, we have worked together to prepare the documents that are now online. As a standard rule at Capital Waters, comply or explain applies. Parties may deviate from the standard agreement, provided that any changes are made visible to the other parties involved. The standard Ordinary Shares Shareholders Agreement is launched today at The State of Dutch Tech organized by Techleap and can be found here. The documentation is not static, we intend to publish an updated version every year. If you have any comments or feedback on these templates, please send us an e-mail to let us know.
Of course, this new Shareholders Agreement is not exclusively for university spin-off’s. Also other startups can use it. For companies that want to raise ordinary shares equity funding from early stage investors, we have also published a simple Subscription Agreement that can be used together with the Ordinary Shares Shareholders Agreement.
As always, we have followed a diligent process to come to the versions now published, taking into account the interests of all parties involved. Together with the University of Twente and Delft University we have prepared and discussed a first version of the Shareholders Agreement and made iterations thereof. We also had fruitful discussions and received feedback from the TTO’s of Eindhoven University of Technology and the University of Amsterdam and finally discussed a more advanced draft in our own Expert Panel which represents the interests of both startups and investors. We want to thank in particular Roy Kolkman for initiating this project and the inhouse legal counsels of Delft University and University of Twente, Judith Smit and Peter van Roosmalen for their support and cooperation.
We want to highlight a few items regarding the published documents:
- The Ordinary Shares Shareholders Agreement will in most cases be part of a larger set of documents. If you are a university spin-off, you will probably also need an Intellectual Property License Agreement or Intellectual Property Transfer Agreement with the university and maybe also a Facilities Agreement to keep using part of the university’s facilities. If you are not a university spin-off but are raising ordinary shares equity financing, you can use the Ordinary Shares Subscription Agreement next to the Shareholders Agreement.
- It’s an Ordinary Shares Shareholders Agreement, so the university or early stage investor will not get any preferred shares or preferential rights usually attached to preferred shares such as liquidation preference rights or anti-dilution protection rights. This makes the Shareholders Agreement fair and simple. At the same time, the agreement follows the same principles and definitions as used in the Capital Waters Preferred Shares documents, so the company is set for growth and can easily switch to preferred shares documentation when needed.
- The startup will have a Management Board that consists of the founding team. Attached to the Shareholders Agreement is a limited list of Management Board decisions that require the approval of the General Meeting of Shareholders by a – to be determined – qualified majority of votes. Also other important shareholder decisions require this qualified majority of votes, which can be two thirds, three quarters or whichever percentage agreed on. The Shareholders Agreement includes the option to install a supervisory board at a later stage.
- The Shareholders Agreement includes a lock-up period and vesting period for founders’ shares. Based on this, founders will lose any unvested shares when leaving the company early. The document also caters for bad leaver and good leaver situations and includes a mandatory offer provision that applies to all shareholders in case of bankruptcy or committing a criminal offence.
- The Shareholders Agreement has standard tag along and drag along clauses and a right of first refusal clause in case a shareholder wants to sell his shares (after the lock-up period). The agreement also includes restrictive covenants, a non-competition clause for founders and confidentiality restrictions for all parties.
- The Subscription Agreement has all customary warranty provisions and closing mechanics for an early stage equity investment. Attached to this agreement is a list of warranties. Depending on the stage of the company, this list might be a bit to extensive and can be shortened as needed.
Whether you are a university spin-off, academic institution or a startup raising ordinary shares equity funding, we hope you will appreciate the new model documents and use them in dealmaking. We will keep on working on providing startup founders and investors better (and free!) access to easy-to-use, balanced, and market-standard investment documents in order for you to save time and money when spinning out and doing venture deals.
Stichting Capital Waters
Don Ginsel & Sjoerd Mol