From term sheet review to contract conclusion, legal strategy that led to bridge investment success.

Law firm Veat advised a manufacturing innovation startup (hereinafter referred to as ‘client’) throughout the process of securing 2.5 billion KRW in bridge investment, including review of the term sheet, negotiation of contract terms, direct drafting of related contracts, and amendment of the articles of association.

Support for term sheet review and negotiation required for investment acquisition

One of the most important documents in a startup’s investment acquisition process is the ‘term sheet’. The term sheet is a document that preliminarily arranges the key conditions between the investor and the company receiving investment, serving as the basis for the investment contract to be concluded later, and can have a significant impact on the company's governance structure and management strategy.

After receiving a draft term sheet from the client, Law firm Veat meticulously analyzed the legal and managerial implications contained in each clause. In particular, it analyzed the pros and cons from the perspective of the company receiving investment, focusing on conditions such as preferred stock conditions, differences in rights compared to common stock, voting rights, investor protection, and conditions for subsequent investment, and presented adjustment directions so that the client's autonomy and the majority shareholder’s interests were not excessively restricted.

Law firm Veat did not merely accept the investor's demands, but actively supported the negotiation process to ensure that the investment terms were coordinated in a direction consistent with the client's vision and long-term growth strategy.

In particular, it considered the possibility of infringement of the existing majority shareholder’s control and the need to secure the company’s strategic autonomy, set priorities for each clause, and focused on securing a balance between investor protection and corporate independence. As a result, the client was able to secure investment while maintaining trust with the investor and without excessive interference in management.

Drafting of investment contract, shareholder agreement, and revision of internal regulations

After the term sheet agreement, Law firm Veat also performed the drafting work for the ‘investment contract’ and ‘shareholder agreement’ to conclude the main contract. The investment contract included protective measures and exception clauses to minimize legal risks, in addition to basic conditions such as investment amount, stock issuance conditions, and capital payment method.

The shareholder agreement specifically coordinated key issues such as subsequent decision-making structure, exercise of voting rights, restrictions on stock transfers, and preemptive rights, and designed clear contractual clauses to prevent disputes in areas where there was a possibility of conflict of interest between existing shareholders and new investors.

Also, this transaction included ‘new stock issuance’ so Law firm Veat also performed the revision of articles of association and internal regulations.

Law firm Veat provided an amendment proposal for the articles of association in compliance with the current Commercial Code and related regulations, while also providing for the client's situation. At the same time, it performed the work of drafting and checking legal documents to ensure that the procedures for board of directors and shareholder meetings were clearly carried out, to support all procedures for capital payment to be completed smoothly.

Investment is not just a short-term acquisition of funds, but a strategic issue that has a significant impact on the company’s long-term growth and sustainability. Therefore, startups in the growth stage need ‘comprehensive legal advice from term sheet review to contract conclusion and revision of internal regulations’.

Investment advisory partner growing together, Law firm Veat

Law firm Veat has provided in-depth legal services for stable and successful investment acquisition to startups from the early stage to the mid-sized enterprises.

In particular, Law firm Veat specializes in complex investment matters such as ‘establishment of transaction structure for investment and M&A, legal due diligence, drafting and negotiation of contracts’, and consistently achieves high rankings in reputable institutions such as Bloomberg and Legal Times’ investment/M&A league table.

Such a rich track record demonstrates that Law firm Veat has real investment advisory capabilities. Law firm Veat is the ‘best advisory partner with proven experience and expertise’ for technology-based startups, manufacturing innovation companies, and companies preparing for venture capital investment.

Law firm Veat will continue to provide the best legal advice to various startups and companies so that they can acquire investment in a healthy and sustainable manner, from the early to the growth stage.

This case study can also be viewed on the Law firm Veat blog below.

- Legal strategy leading to successful bridge investment, from term sheet review to contract conclusion

Thank you.

Law firm Veat