Fundie Ventures uses a platform called Leva (Leva Capital Partners AG), who has has developed a regulatory-compliant investor pooling solution that enables deal managers to easily syndicate deals and pool co-investors. The purpose of this document is to describe and explain the role of Fundie Ventures as the deal manager within Leva's syndicate structure:
THE ROLE OF THE DEAL MANAGER IN LEVA'S SYNDICATE STRUCTURE
What is the role of the deal manager within the Syndicate?
When investing through Leva's pooling solution, the deal manager and the co-investors build an investment syndicate that is structured as a simple partnership according to Art.530 et seqq. of the Swiss Code of Obligations (the "Syndicate").
The deal manager is the administrator (service provider) of the Syndicate. In this role, the deal manager is authorised and instructed to represent the Syndicate and to subscribe for or enter into and hold the investment for the Syndicate and its members. In addition, the deal manager provides further administrative services for the Syndicate such as general administration (e.g.document storage and sharing, performance reporting, communication between the target and the Syndicate, organization of meetings of and votes amongst the Syndicate members, etc.).
Who is the deal manager and what is the relationship between the deal managers and the co-investors?
Fundie Venture is the deal manager for each Syndicate. Fundie Ventures is responsible for sourcing, vetting and preparing each deal for a syndicate investment. The deal manager is always a member of the Syndicate irrespective of whether we financially participate in the investment opportunity. The rights and obligations of the co-investors and the deal manager are set out in a partnership agreement (Simple Partnership Agreement / Terms of Syndicate), which is specific to each Syndicate.
How does the deal manager enter into or hold an investment?
Typically, the deal manager acts as an indirect representative of the syndicate, i.e. Fundie Venture acts in its own name, but for the account of the Syndicate (or its members). This means that the deal manager formally holds the investment and that, in relation to the target company, all rights and obligations associated with the investment rest with the deal manager, while the syndicate (or its members) hold beneficial ownership of the investment according to the terms of the partnership agreement. Accordingly, the deal manager typically acts as follows:
- Equity Investment:
- the deal manager subscribes for the shares (in case of an investment into a stock corporation) or the capital contributions (in case of an investment into a limited liability company) and signs the respective subscription form in its own name;
- the deal manager enters into any other agreements related to the investment, such as a shareholders' or investors' agreements or, in case of an exit from the investment, a sale and purchase agreement, in its own name;
- the deal manager is registered in the share register (in case of an investment into a stock corporation) or the register of contributions (in case of an investment into a limited liability company) of a target company with its own name (while the syndicate members may have to be registered in the register of beneficial owners);
- in case of an investment into a Swiss limited liability company, the deal manager is registered in the commercial register as partner or company member of the target company in its own name;
- the deal manager attends and votes at the target company’s general meetings after receiving the appropriate instructions from the Syndicate members.
- Debt Investment:
- the deal manager signs the loan or convertible loan agreement with the target company in its own name;
- the deal manager enters into any other agreements related to the investment (such as a shareholders' or investors' agreement which may have to be signed after a convertible loan has been converted) in its own name;
- after the conversion of a convertible loan, the deal manager becomes a shareholder of the target company, i.e. Fundie Ventures registered in the relevant registers as a share-holder and attends and votes at the target company’s general meetings (see above).
Note: Indirect representation requires that the deal manager acts in its own name without necessarily mentioning the indirect representation (i.e. without referring to the Syndicate). Nevertheless, if express reference is to be made to the Syndicate, documents could be signed, for example, by adding the following next to the name of the deal manager: "(acting its own name, but for the account of [NAME OF THE SYNDICATE])" or"(as the nominee for [NAME OF THE SYNDICATE])".
What else needs to be considered?
It must be possible that the rights and obligations associated with the investment can be transferred and assigned to a new deal manager (in case the Fundie Ventures needs to be replaced) or to the co-investors (in case the Syndicate needs to be unwound at some point, e.g. due to expiration of the holding period of the investment or expiration of the term of the partnership agreement). Accordingly, the deal managers must ensure that all relevant investor documents (such as shareholders' or investors' agreements, loan or convertible loan agreements etc.) contain an appropriate permitted transfer or permitted assignment clause that allows such transfer and/or assignment and that prevents any transfer restrictions (such as no assignment clauses, right of first refusal, tag along, drag along or similar rights, etc.) from being triggered in case the deal manager needs to be replaced or the Syndicate needs to be un-wound.
Furthermore, in order to prevent that in case the Syndicate needs to be unwound, each Syndicate member must be registered in the share register, register of contributions and/or, where applicable, the commercial register of the target company, the relevant investor documents should contain a clause that allows the target company to again pool such investors (e.g. by adding a clause that minority shareholders below a certain threshold agree that they may be pooled upon request of the target company).
DISCLAIMER: This is strictly private, confidential and personal to its recipients and should not be copied, distributed or reproduced in whole or in part, nor passed to any third party. The recipient may, however, disclose this document to his/her/its employees or consultants on a need-to-know basis. The information provided in this document is for general information purposes only. All information is provided in good faith, however, no representation or warranty of any kind, express or implied, is made regarding the accuracy, adequacy, validity, reliability, availability or completeness of any information contained in this documents.