Understanding expected returns and required consents

If you have raised equity financing over the course of the company's life, it will be critical to understand how your return waterfall works, including any liquidation preference, and to have modelled expected returns for different classes of shares at different exit valuations. Once you have done that, map those returns against the consent regime (director, shareholder, or other) applicable to a sale – are there any investors whose consent is required to do a deal but whose returns are looking lacklustre? Tensions can arise where founding teams and early-stage investors wish to pursue an exit, but more recent investors want the company to build towards the next valuation inflection point and beyond before selling out. Strategic investors who are less returns-orientated can also be difficult to manage as part of any sale process, although the worst of this can be avoided if proper protections have been negotiated at the time of their investment.

At a general level, it is also necessary to assess the required consents in advance (e.g. consent of the general meeting with the share transfer, if the company’s articles of association so require), or potential restrictions on the transferability of registered shares in case of a stock corporation. Moreover, it is worth checking the required quorum for decision-making in advance. Court of Appeal. First instance decisions may be appealed to the respective higher regional court within one month of service of the first instance decision. The appellate court decision may, under certain circumstances (e.g. to ensure uniform case law or where the matter is of fundamental significance), be appealed on points of law to the German Federal Court of Justice.