ArmInfo.Armenia is thinking about introducing a new tool for foreign investment in startups. The draft corresponding amendments to the law "On Joint Stock Companies" were approved at a government meeting on January 18. As stated in the explanation to the document, the goal is to create legal conditions for attracting investments in RA companies through a SAFE contract.
SAFE (simple agreement for future equity) is a standard agreement developed by an American venture fund. SAFE works as follows: an investor provides cash to the company, and when the startup reaches a new round of investment, the SAFE is automatically converted into shares of the company. To conclude a SAFE, it is only necessary to agree on the investment amount, valuation cap and/or discount to the valuation of the future round. Otherwise, SAFE is a standardized document that is not customary to change.
It is expected that with the adoption of the project, a simple and understandable tool will be created for making foreign investments in companies at the initial stage of their development. "Legal regulation of this instrument will help attract investments and investors, clearly regulate relations that arise between companies at the initial stage of development, stability and predictability of legal relations," the draft decision says.
