Startup Investment Agreement for Saudi Arabia

Startup Investment Agreement Template for Saudi Arabia

A comprehensive legal agreement governed by Saudi Arabian law that outlines the terms and conditions under which investors will provide capital to a startup company in exchange for equity ownership. The document incorporates specific requirements of Saudi corporate law, foreign investment regulations, and where applicable, Shariah compliance principles. It details the investment structure, valuation, shareholder rights, governance mechanisms, and exit provisions while ensuring compliance with Saudi Arabia's regulatory framework, including the Companies Law of 2015 and relevant Capital Market Authority regulations.

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What is a Startup Investment Agreement?

The Startup Investment Agreement is a crucial document used when investors are making an equity investment in a Saudi Arabian startup company. This agreement is particularly relevant in the context of Saudi Arabia's Vision 2030 initiative, which aims to foster entrepreneurship and increase private sector participation in the economy. The document must comply with Saudi Arabian legal requirements, including the Companies Law of 2015, Foreign Investment Law, and where applicable, Capital Market Authority regulations and Shariah principles. It typically includes detailed provisions on investment terms, shareholder rights, corporate governance, share transfer restrictions, and exit mechanisms. The agreement is essential for protecting both investor and founder interests while ensuring the investment structure supports the startup's growth objectives and complies with local regulatory requirements.

What sections should be included in a Startup Investment Agreement?

1. Parties: Identification of all parties including the Company, Founders, and Investors with their full legal names and addresses as required under Saudi law

2. Background: Context of the investment, brief company history, and purpose of the agreement

3. Definitions: Definitions of key terms used throughout the agreement, including Arabic terms where relevant

4. Investment Terms: Details of the investment amount, valuation, and number of shares being issued

5. Completion Mechanics: Steps for completing the investment, including conditions precedent and timing

6. Warranties and Representations: Standard warranties from the Company and Founders, including compliance with Saudi laws

7. Share Rights and Capital Structure: Description of share classes, rights attached to shares, and capital structure post-investment

8. Board Composition and Governance: Board structure, appointment rights, and corporate governance provisions

9. Reserved Matters: Decisions requiring investor approval, including statutory requirements under Saudi law

10. Transfer Restrictions: Restrictions on share transfers and foreign ownership limitations if applicable

11. Exit and Liquidation Rights: Provisions regarding company sale, IPO, or liquidation

12. Confidentiality: Confidentiality obligations and permitted disclosures

13. Notices: Process for formal communications between parties

14. Governing Law and Jurisdiction: Confirmation of Saudi law as governing law and jurisdiction of Saudi courts

What sections are optional to include in a Startup Investment Agreement?

1. Anti-dilution Protection: Protection for investors against future down rounds, used in larger investments

2. Founder Vesting: Vesting schedule for founder shares, typically used with first-time founders

3. Employee Share Option Pool: Creation and terms of an ESOP, if planned

4. Tag-Along Rights: Co-sale rights for investors, common in minority investments

5. Drag-Along Rights: Ability to force minority shareholders to join in a sale, used in larger investments

6. Non-Compete and Non-Solicit: Restrictions on founder competition and employee solicitation

7. Shariah Compliance: Specific provisions ensuring Shariah compliance, if required

8. Intellectual Property Assignment: Assignment of IP rights, important for technology startups

9. Foreign Investment Provisions: Additional provisions required for foreign investors

What schedules should be included in a Startup Investment Agreement?

1. Schedule 1: Cap Table: Current and post-investment capitalization table

2. Schedule 2: Company Information: Detailed company information including registration details, licenses, and permits

3. Schedule 3: Warranties: Detailed warranties given by the Company and Founders

4. Schedule 4: Reserved Matters: Detailed list of matters requiring investor approval

5. Schedule 5: Completion Requirements: Detailed conditions precedent and completion deliverables

6. Schedule 6: Key Terms: Summary of key investment terms and valuation details

7. Schedule 7: Business Plan: Company's business plan and financial projections

8. Appendix A: Board Regulations: Detailed board procedures and governance rules

9. Appendix B: Share Rights: Detailed description of rights attached to different share classes

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

Jurisdiction

Saudi Arabia

Publisher

Genie AI

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Technology

E-commerce

Financial Technology

Healthcare Technology

Education Technology

Clean Energy

Logistics and Transportation

Manufacturing

Retail

Food and Beverage

Real Estate Technology

Agricultural Technology

Media and Entertainment

Telecommunications

Professional Services

Biotechnology

Relevant Teams

Legal

Finance

Corporate Development

Investment

Compliance

Executive Management

Board of Directors

Corporate Governance

Risk Management

Strategy

Business Development

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Chief Legal Officer

General Counsel

Investment Manager

Venture Capital Partner

Corporate Lawyer

Investment Director

Managing Partner

Business Development Director

Startup Founder

Company Secretary

Legal Counsel

Compliance Officer

Board Member

Investment Analyst

Due Diligence Officer

Financial Controller

Industries
Companies Law (2015): The primary legislation governing company formation, structure, and operation in Saudi Arabia. It defines different types of companies, shareholder rights, and corporate governance requirements.
Foreign Investment Law (2000): Regulates foreign investment in Saudi companies, including investment licensing requirements, ownership restrictions, and investor protections.
Capital Market Law (2003): Relevant if the investment involves securities or if future IPO is contemplated. Governs securities, trading, and capital market activities.
Commercial Courts Law (2020): Establishes jurisdiction for commercial disputes and enforcement of commercial contracts, including investment agreements.
Anti-Money Laundering Law: Ensures compliance with AML regulations in investment transactions and company ownership structures.
Competition Law (2019): Regulates market competition and prevents monopolistic practices, relevant for investment restrictions and market entry.
Value Added Tax Law: Important for understanding tax implications of investment transactions and ongoing business operations.
Labor Law: Relevant for understanding employment-related obligations and Saudization requirements that may affect the startup's operations.
Bankruptcy Law (2018): Provides framework for business restructuring and bankruptcy proceedings, important for investor protections and risk assessment.
Commercial Agencies Law: May be relevant if the startup operates as an agent or distributor for foreign companies.
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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