Wednesday, March 13 2024 16:38

ArmInfo.Armenia's Ministry of Economy has initiated changes to the RA Law "On Joint Stock  Companies", which provides for the introduction of a new format for concluding an agreement - SAFE (Simple agreement for future equity. 

As explained during the meeting of the Standing Parliamentary  Commission on Economic Affairs by the acting. Deputy Minister of  Economy Rafael Gevorkyan, this format of the agreement is most  beneficial for start-up companies, although there are no restrictions  for other players in this sense.

In particular, he said that under such an agreement, an investor  gives money to a startup with the condition that he will receive  shares, usually at a predetermined price, when certain stages are  completed, for example, entering an IPO, attracting new investments,  etc. In the event of bankruptcy of the company , the investor, under  certain conditions, will receive the invested funds back. Gevorkyan  noted that such an agreement format is a fairly common practice in  the world.

SAFE implies the conversion of early investments into a block of  shares according to a similar principle, but does not imply the  application of an interest rate and does not have a "maturity  period". The investor provides money to the project in exchange for  an obligation to allocate a proportionate share of shares after the  startup is evaluated; the startup invests these funds in the  development of its solution and scales the business, increasing  financial turnover; When a startup is ready for a new round of  funding, it seeks Series A investors and receives a valuation; Based  on the assessment received, the startup determines the current value  of its shares; the investment amount is divided by the value of the  share, and the corresponding share is transferred to the SAFE  investor.

SAFE's capabilities allow you to flexibly customize the terms of the  agreement, protect yourself from many risks, and maintain your share  in the future. In the event of termination of the company's  activities, the SAFE investor receives back his funds in full (if  possible) or in proportion to his share. If the company is sold or  goes public, the SAFE investor receives an amount of money  proportional to his share of shares.