What is the reason for these vetoes? Why do investors want to have a say in certain decisions and issues? The basic idea is that we (investors) want to get a minimum of information and control over important decisions of companies that can have a considerable influence on the value of our investment. However, the founders should not be intimidated: the things on which we want to have a say generally have no influence on the daily life of business. On the other hand, the measures taken outside of normal operations are those that worry investors. Keep in mind that at the end of the day, VC money will also be threatened and investors should focus on cooperation in important decisions. – for example. B, management or other contracts with shareholders or other transactions with which they are linked, unless they engage in armaments activities. The agreement will contain specific and practical rules regarding the company and shareholder relations, which are examples: – The fear could be that other shareholders will manipulate such agreements to allow themselves or allies to increase control with important alliances internally and/or reduce the profits of dividends. Before entering into a shareholders` agreement, you should speak to a business lawyer. If you are a minority shareholder, if the decisions are made by the majority of the shareholders, these decisions are binding on you. It is important that your lawyer carefully review the agreement and discuss it with you; what rights do you have under the agreement, how those rights are protected and what other concerns you may have. – This is a veto that may require negotiations and a clear definition, or risk being very restrictive. Veto rights do not give your investors the right to make decisions on behalf of the company.
Instead, allow them to avoid a decision with which they disagree. Some of the issues covered by the veto are essential to good corporate governance. It is also in the entrepreneur`s interest to involve its major investors in these crucial issues (sale of the business, allocation of more ESOP, fundraising, etc.). As a founder, you want a board control mechanism, especially as you add more investors. If you don`t like the veto, you can replace it with positive voting rights. The affirmative voting rights give the investor the right to approve all important decisions. We do not like that and never ask for a positive right to vote. Reaching any investor to get decision approvals is very inefficient in running a business.