FOUNDERS’ INSTITUTE

OVERVIEW OF STARTUP LEGAL

OSLO, 30 JANUARY 2019

"A few things" to think about…
Corporate
form

Business Business
plan partners

Government
Employees IDEA (Tax, VAT,
permissions)

IP Protection Other things!

Investors and
other
financing

Advokatfirmaet Selmer DA  Doc. ref.: 3624093 2

Top "Founder" Legal Concerns

• Ownership of IP (previous work; transfer by

others)
• Freedom to operate (non-competes / NDAs,
regulatory environment, blocking patents, etc.)
• Entity formation (timing, form of organisation,
location)
• Capital structure (% ownership, voting rights,
vesting schedules)
• Employment (contractors vs employees, visas,
stock options)
• Initial funding (solicitations, accreditations,
filings)
• Protection of IP (patent and TM filings, trade
secrets, Terms of Use)

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 FORM OF ORGANIZATION – LIMITED
LIABILITY!
- Norwegian "AS" (private limited liability company)
- Company’s obligations, not yours (but also company’s rights, not yours)
- Cheap, simple and efficient – robust and flexible legislation
- Separate financial and taxable subject

Advokatfirmaet Selmer DA  Doc. ref.: 3624093 4

Shareholders Agreements – why?

∙ Agreements are binding on the parties – no one else

∙ Agreements are flexible and should be tailor made – standards may be good, but not perfect
∙ Agreements should be entered into on "sunny days" – to regulate "rainy days"

Cooperation

Incorporation Time

Advokatfirmaet Selmer DA  Doc. ref.: 3624093 5

Shareholders agreement – regular clauses
∙ Business Plan
∙ Composition of the board of directors
∙ Voting regulation for board of directors
and the general meeting, veto rights for
certain shareholders (reserved matters)
∙ Future funding and the shareholders’ right
to participate in share issues - anti-
dilution rights
∙ Dividends
∙ Sales restrictions
∙ Each shareholder's sale of shares
− Right of first refusal
Advokatfirmaet Selmer DA
∙ Sale of all shares (Exit)
− Tag along (Nw. medsalgsrett)
− Drag along (Nw. medsalgsplikt)
− Structured sales process / IPO
∙ Non-compete/non-solicit
∙ Confidentiality
∙ Default / Material breach - sanctions
∙ Term/termination
∙ Accession
∙ Governing law/dispute resolution
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Important statutory thresholds
-May be altered by agreement

90%
• "Squeeze outs"
> 2/3 • Certain
• Change AoA "Qualified" AoA
> 50% changes
• Share issue
• Elect board • Capital reductions
> 1/3 • Elect auditor • Mergers/demergers
• Block changes to • Approve accounts • Board
10% AoA • Adopt dividends authorizations
• Summon general • Other corporate
meeting decisions
• Require
investigations

Advokatfirmaet Selmer DA  Doc. ref.: 3624093 7

 FINANCING

Advokatfirmaet Selmer DA  Doc. ref.: 3624093 8

Sources of financing

EQUITY DEBT GRANTS

Loans from private

Founders Innovation Norway
investors/ friends and family

"FFF" EU/EEA grants

Bank loans
(friends, fools and family) (Horizon2020, etc.)

Professional investors P2P loans/crowdfunding SkatteFUNN

• Angel investors/business angels
• Private Professionals and Family
office
• Incubators/Accelerators Convertible loans
• Seed and Venture funds

Advokatfirmaet Selmer DA  Doc. ref.: 3624093 9

A few things to think of…

EQUITY DEBT GRANTS

What grants and subsidies

Equity issuance entails Interest rate?
are available?
dilution
• How much is needed?
• At what valuation? Requirements and
Security?
• What kind of investors? obligations?

Conversion rights
(at what price)?

Advokatfirmaet Selmer DA  Doc. ref.: 3624093  10

 FOUNDERS’ AND EMPLOYEES’
OWNERSHIP

Advokatfirmaet Selmer DA  Doc. ref.: 3624093  11

Share based incentives

Advokatfirmaet Selmer DA  Doc. ref.: 3624093  12

Introduction

WHAT TYPES OF INCENTIVES ARE AVAILABLE?

∙ Purchase or subscription of shares
COMBINATIONS
∙ Grant of options (warrants, stock options)
∙ Cash bonus (bonus, synthetic shares)

TO WHOM?
∙ Co-founders
∙ Management
∙ Employees
− Importance for business
− Common goals – everyone going in the same direction
− "Ownership" – strong psychological incentive
− No one washes a rental car

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Shares and options as compensation

• To attract
• To retain

• Lack of liquidity (at least for competitive salaries)

− Especially relevant for startup and growth companies
− BUT NOT FREE – tax and social costs

• Strategic relationships

• Less hard on liquidity than cash compensation

Advokatfirmaet Selmer DA  Doc. ref.: 3624093  14

Shares, options and taxation

Advokatfirmaet Selmer DA  Doc. ref.: 3624093  15

 Our offices

Oslo Trondheim
Advokatfirmaet Selmer DA Advokatfirmaet Selmer DA
P.O. Box 1324 Vika P.O. Box 869
0112 Oslo, Norway 7409 Trondheim, Norway

Visiting address: Tjuvholmen allé 1 Visiting address: Kjøpmannsgata 52

T: + 47 23 11 65 00 T: + 47 23 11 65 00

E: selmer@selmer.no
W: selmer.no

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