Exit Agreements with Effect on the Transfer of Shares to Third Parties in Venture Capital

Document Type : Original Article

Authors

1 Assistant Professor,Faculty of Law, Shahid Beheshti University

2 L.L.M, Faculty of Law, Shahid Beheshti University, Tehran, Iran

Abstract

Contractual agreements in venture capital, which is the primary source of financing for startups, can be divided into three categories: financial, control and exit agreements. Exit agreements refer to provisions that aim to facilitate investors' access to a successful and efficient exit from a venture-backed company. This is the ultimate and most critical phase of venture capital. Among the exit agreements, two of them directly affect the transfer of shares to third parties, which are the primary and common exit strategies and ways in venture capital. These two provisions, which are called the “exit agreements with effect on the transfer of shares to third parties” are the “Drag-Along Right” and “Tag-Along Right”. Analyzing the nature and function of the aforementioned agreements and examining their conformity with the relevant legal rules and regulations, as well as jurisprudential principles, reveals that despite doubts, implementing these important and useful provisions as legitimate agreements that do not conflict with imperative provisions will not face any legal obstacles under the Iranian legal system relying on the principles of freedom and validity of contracts.

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Legal Research Quarterly
Volume 27, Issue 3 - Serial Number 107
November 2024
Pages 139-155

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History

  • Receive Date: 05 June 2023
  • Revise Date: 28 July 2024
  • Accept Date: 26 August 2024

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