ArmInfo.The RA government wants to introduce a new format for concluding an agreement - SAFE (Simple agreement for future equity). At a meeting on April 26, the RA National Assembly Commission on Economic Issues issued a positive conclusion on the amendments to the law "On Joint-Stock Companies."
According to the Deputy Minister of Economy of the Republic of Armenia 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, under such an agreement, the investor gives the startup money 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 proportional share of shares to it after the startup is evaluated, the startup invests these funds in the development of its solution and scales the business, increasing its financial turnover, when the startup is ready for a new round of financing, it seeks Series A investors and receives a valuation. Based on the assessment received, the startup determines the current value of its shares, and 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.
