Preferred Stock Purchase Agreement for Germany

Preferred Stock Purchase Agreement Template for Germany

A Preferred Stock Purchase Agreement under German law (governed by the Aktiengesetz and related statutes) is a comprehensive legal document that outlines the terms and conditions under which investors purchase preferred shares in a German company. The agreement details the rights, preferences, and privileges attached to the preferred stock, including dividend rights, liquidation preferences, voting rights, and conversion features. It incorporates specific German legal requirements for share issuance, corporate governance structures, and shareholder rights, while also addressing investor protections and compliance with German securities regulations.

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What is a Preferred Stock Purchase Agreement?

The Preferred Stock Purchase Agreement is a crucial document used in German corporate finance transactions when a company seeks to raise capital by issuing preferred shares to investors. This agreement, governed by German law, particularly the Aktiengesetz (Stock Corporation Act), is commonly used in venture capital and private equity investments. It outlines the specific terms of the investment, including share price, number of shares, investor rights, and corporate governance provisions. The document must comply with German corporate law requirements, including notarization of certain corporate actions and specific formalities for share issuance. It's particularly important for growth-stage companies seeking institutional investment while maintaining control over their operations through specialized share classes. The agreement typically includes comprehensive representations and warranties, conditions to closing, and various investor protection mechanisms adapted to the German legal framework.

What sections should be included in a Preferred Stock Purchase Agreement?

1. Parties: Identification of the Company (issuer) and the Purchaser(s) of the preferred stock

2. Background: Recitals explaining the context of the transaction and the Company's authorization to issue preferred stock

3. Definitions: Defined terms used throughout the agreement

4. Purchase and Sale of Preferred Stock: Core transaction terms including number of shares, purchase price, and class of preferred stock

5. Representations and Warranties of the Company: Company's statements regarding its legal status, authority, capitalization, and business condition

6. Representations and Warranties of the Purchaser: Purchaser's statements regarding authority, investment intent, and qualification

7. Covenants: Ongoing obligations of the parties, including information rights and corporate governance matters

8. Conditions to Closing: Prerequisites that must be satisfied before the transaction can close

9. Closing: Mechanics of the closing, including timing, deliverables, and payment procedures

10. Preferred Stock Rights: Special rights attached to the preferred stock, including dividend rights, liquidation preferences, and conversion rights

11. Registration Rights: Rights relating to the registration of the preferred stock for public trading

12. Transfer Restrictions: Limitations on the transfer of preferred stock

13. Termination: Circumstances under which the agreement may be terminated

14. Miscellaneous: Standard legal provisions including governing law, notices, amendments, and entire agreement

What sections are optional to include in a Preferred Stock Purchase Agreement?

1. Pre-emptive Rights: Grants existing shareholders the right to participate in future financing rounds - include when requested by investors

2. Tag-Along Rights: Allows minority shareholders to join in the sale of shares by majority shareholders - include for minority investor protection

3. Drag-Along Rights: Enables majority shareholders to force minority shareholders to join in a sale - include when requested by lead investors

4. Anti-dilution Protection: Protects investors from dilution in future down rounds - include when negotiated by investors

5. Board Representation: Rights of preferred stockholders to appoint board members - include when investors require board seats

6. Information Rights: Detailed reporting requirements - include for significant investors

7. Employee Stock Option Provisions: Terms related to employee stock options - include if company has or plans ESOP

8. Founder Commitments: Specific obligations of founders - include when founders remain key to operations

What schedules should be included in a Preferred Stock Purchase Agreement?

1. Schedule A - Capitalization Table: Current and post-closing capitalization of the company

2. Schedule B - Company Disclosure Schedule: Exceptions to company representations and warranties

3. Schedule C - Form of Shareholders' Agreement: Agreement governing relationships between shareholders

4. Schedule D - Articles of Association Amendments: Required changes to the company's articles of association

5. Schedule E - Registration Rights Agreement: Detailed terms of registration rights

6. Schedule F - Management Rights Letter: Agreement regarding investor's management rights

7. Schedule G - Form of Legal Opinion: Form of legal opinion to be delivered at closing

8. Schedule H - Key Employee Agreements: Forms of employment agreements for key personnel

9. Appendix 1 - Preferred Stock Terms: Detailed terms and conditions of the preferred stock

10. Appendix 2 - Closing Checklist: List of all required closing deliverables and actions

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

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What is a Preferred Stock Purchase Agreement?

What sections should be included in a Preferred Stock Purchase Agreement?

What sections are optional to include in a Preferred Stock Purchase Agreement?

What schedules should be included in a Preferred Stock Purchase Agreement?

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