Start-up Financing Primer

Start-ups in Austria employ a diverse range of financing instruments to propel their growth. The typical instruments of start-up financing are: (i) equity financing; (ii) convertible investments; and (iii) public grants.

Equity financing

Equity financing is the traditional and prevalent method of venture capital (VC) and start-up financing and is typically provided via a cash capital increase in combination with capital contributions (Gesellschafterzuschuss) (i.e. capital in exchange for equity). Depending on the start-up's situation, financing may be contingent on satisfaction of milestones or conditions precedent (e.g. minimum turnover figures or availability of product-related features).

Convertible investments

As an alternative to equity financing or bridge financing instruments, convertible loans (CLA) or simple agreements for future equity (SAFE) are commonly used in VC and start-up practice. CLAs and SAFEs are designed to allow investors to provide capital to a start-up while deferring the determination of the company's valuation until a later date. For more info on CLAs and SAFEs please click here.

Public grants

The typical instruments of start-up financing are: (i) (convertible) loans; (ii) equity financing; and (iii) public grants.

Convertible loans are becoming more popular, especially among angel investors and venture capital funds.

Equity finance is typically provided via a cash capital increase and is a preferred option for venture capital and private equity funds who wish to exercise more control in the start-up.

Depending on the start-up's situation, financing is provided upon satisfaction of milestones or conditions precedent (e.g. minimum turnover figures or availability of product-related features).

Public grants in the form of non-refundable funds are provided mainly by EU funds, but also by the government or municipalities. In 2015, the Bulgarian State set up a special-purpose joint-stock company – Fund Manager of Financial Instruments in Bulgaria, whose aim is to manage and operate EU funds, and thereby to finance start-up companies in Bulgaria.

Besides bootstrapping, the typical instruments of start-up financing are: (i) loans (including shareholder loans and subsidised loans); (ii) public grants; and to a lesser extent (iii) equity financing.

Public grants in the form of non-refundable funds are provided by state agencies, ministries, local and regional self-governments and EU funds.

Equity finance is typically provided by angel investors as well as regional venture capital funds via a share capital increase (povećanje temeljnog kapitala). Depending on the start-up's situation, financing is provided upon satisfaction of milestones or conditions precedent (e.g. minimum turnover figures or availability of product-related features). Start-up Accelerator programmes like ZIP (Zagrebački inkubator poduzetništva) provide seed funding, mentorship and resources in exchange for equity.

The first registered Croatian VC fund with a focus on start-ups and SME enterprises was initiated in June 2019. Since then, the investment landscape has steadily grown, leading to the creation of additional local venture capital funds, along with pension funds that are now permitted to invest in start-ups through VC funds.

The typical instruments of start-up financing are: (i) (convertible) loans and (ii) equity financing. Public grant schemes are less developed and less popular among start-up founders in the Czech Republic.

Equity finance is typically provided via a cash capital increase in combination with equity capital contributions (příplatek mimo základní kapitál). Depending on the start-up's situation, financing is provided upon satisfaction of milestones or conditions precedent (e.g. minimum turnover figures, customer/client base or availability of product-related features).

Silent partnership (tichá společnost) is – in principle – a civil law (contractual) relationship between the company and a silent partner (investor), where the silent partner provides the contribution to the company and in return is entitled to receive dividends from the company's business activities. In addition, the silent partner is entitled to inspect the company's books and records and has other information rights. However, silent partnership schemes are rarely used in the start-up segment.

Typical financing instruments in Poland cover public aid (equity and grants), convertible investments (including loans and SAFEs), equity financing and shareholders loans.

Public aid

In Poland, start-ups frequently benefit from public aid provided by entities such as the National Centre for Research and Development (Narodowe Centrum Badań i Rozwoju, "NCBiR") and the Polish Development Fund (Polski Fundusz Rozwoju, "PFR"). Public aid can take the form of traditional grants (subsidies) or equity investments, where NCBiR and/or PFR become indirect shareholders of a start-up through dedicated investment funds.

Convertible investments

Convertible investments in Poland include convertible loans (CLAs) and simple agreements for future equity (SAFEs). Under both CLAs and SAFEs, a start-up receives financing that can be converted into equity if certain pre-defined conditions (mainly related to the valuation of the start-up or other key performance indicators) are met. Convertible investments are typically used to secure an investor's position until the start-up establishes its valuation or meets specific business and financial assumptions. Typically, CLAs are based on the assumption that the financing will be returned unless the aforementioned conditions are not met. Thus, provision of the financing is not definite. Typically, the loan bears interest. In contrasts, SAFEs operate on the assumption that the financing will be converted as soon as the valuation is confirmed. As such, they do not involve the concept of repayment of the financing or the accrual of interest.

The conversion is usually structured as a cash capital increase, with the convertible investor entitled (or sometimes obliged) to subscribe for newly issued shares in exchange for waiving the outstanding loan amount. A contribution in kind of the outstanding loan receivable is also possible. The tax consequences of both conversion mechanisms may vary. Convertible investments are not explicitly regulated under Polish law, so they must be carefully structured to ensure enforceability. It is often important to include all start-up founders and other shareholders as parties to the contract. CLAs are more common than SAFEs, as SAFEs can have adverse tax consequences in certain circumstances.

Equity financing

Equity financing is typically provided through a cash capital increase. Depending on the start-up's situation, financing is provided upon meeting specific milestones or conditions (e.g. minimum turnover figures or product-related features). Under Polish law, the articles of association of a limited liability company (LLC) may also require shareholders to make additional capital payments (dopłaty) to finance the company or cover losses. These additional payments are presented in the start-up's balance sheet as its own capital, similar to typical equity. Additional payments may be returned to shareholders based on a separate resolution if they are not needed to cover losses shown in the financial statements. Since their return is conditional on specific financial parameters and shareholder decisions, additional payments are considered a form of equity financing. Joint-stock companies and PSAs do not have provisions for additional payments as defined for LLCs.

Shareholder loans

Apart from CLAs, regular loans granted by a start-up's shareholders are also a popular form of financing.

Start-ups are commonly financed by convertible investments, shareholder loans and equity financing. Traditional bank financing is generally not available to start-up companies, as banks usually require a proven track record and solid collaterals.

Equity finance is typically provided via a cash capital increase in combination with capital contributions. Depending on the start-up's situation, financing is provided upon satisfaction of milestones or conditions precedent (e.g. minimum turnover figures or availability of product-related features).

Start-ups may seek financing from alternative resources, such as:

• Angel investors, i.e. high-net-worth individuals who invest in new ventures, sometimes creating an investment portfolio with multiple companies in various sectors. They are particularly valuable to new businesses because they bring in "smart money", comprising their experience, advice, network and, ultimately, funds.
• Venture capital funds that professionally invest large sums of money in new businesses, while helping to build the company so as to increase its valuation, anticipating acquisition or the company going public.
• Crowdfunding platforms used by start-ups to raise capital from a broad audience, fostering community support and acting as a form of market validation.

In such cases, investors typically require a minority stake in the start-up, while some also take over positions on the board of directors or other advisory boards.

The law also recognises the concept of "preferential shares" in joint-stock companies (acțiuni preferențiale cu dividend prioritar fără drept de vot), allowing their holders preferential rights to dividends, but only a right to attend (and not vote) in general meetings. Such shares are used to a lesser extent in practice, given the absence of efficient controlling rights for their holders.

The typical instruments of start-up financing are: (i) public grants and subsidies; (ii) convertible investments and shareholder loans; and (iii) equity financing – typically structured as a share capital increase with cash contributions (povečanje osnovnega kapitala z denarnimi vložki). Later-stage start-up companies may also access debt finance, such as micro-loans and loan guarantees, offered on subsidised terms by SID Banka, a state-owned export and development bank, through various of its SME support schemes. In addition, equity-based and reward-based crowdfunding (e.g. via Kickstarter, Indiegogo, Adrifund and Conda) is becoming increasingly popular among Slovenian start-ups.

In terms of state-sponsored sources of financing, the Slovenian Enterprise Fund (Slovenski podjetniški sklad; "SEF") provides various investment products, grants and subsidies, such as convertible loans, equity co-investing, micro-loans, guarantees to secure bank loans and vouchers. In addition, the SEF also provides non-refundable financing for innovative companies in the inception phase.

Private sources of capital typically include domestic or, more commonly, regional VC funds and business angels (e.g. through the Business Angels of Slovenia (Poslovni angeli Slovenije) association).

Silent partnerships (tiha družba) were removed from Slovenian corporate legislation in 2015. The law currently states that any beneficiary who gains "the right to participate in a company's profits based on a financial investment" must be registered with the Slovenian court and commercial register, linked to that company's entry. However, the scope of this provision is unclear, and it appears to be rarely used in practice.

Until recently, the limited liability company (Gesellschaft mit beschränkter Haftung; "LLC") was considered the most common corporate form for start-ups in Austria. However, since 1 January 2024, Austria has a new legal form – the flexible company (Flexible Kapitalgesellschaft; "FlexCo"). As its name suggests, the FlexCo is all about being flexible and it addresses longstanding criticisms directed at Austria's predominant corporate form, the LLC. The LLC has faced extensive criticism in the start-up world due to its perceived lack of flexibility and strict formal requirements. The FlexCo combines features from both the conventional LLC and the stock corporation (AG) but also introduces some totally new concepts to Austrian corporate law, such as company value shares. Time will tell whether the FlexCo can become considered the most common corporate form for start-ups in Austria and replace the LLC.

For more information on the formation of an LLC and/or FlexCo, as well as the key differences, please click here.

The limited liability company (дружество с ограничена отговорност; "LLC"). An LLC has a minimum share capital of BGN 2 (approx. EUR 1). The share capital consists of the contributions of the shareholders and each contribution cannot be less than BGN 1. The value of the contributions can differ from shareholder to shareholder. If the subscribed share capital is more than the required minimum, only 70 % of the subscribed share capital may be paid upon establishment of the LLC. The applicable corporate income tax rate for all companies is 10 %.

The limited liability company (društvo s ograničenom odgovornošću; "LLC"). An LLC has a minimum share capital of EUR 2,500. At least a quarter of the share capital must be paid-up at establishment, while the rest should be paid within one year from registration. The nominal amount of each share must be at least EUR 10. Administrative and nfotarial costs for establishing an LLC amount up to EUR 550.

It is possible to establish a "simple" limited liability company (jednostavno društvo s ograničenom odgovornošću) with share capital of only EUR 1, which must be paid-up in full at establishment. The nominal amount of each share must be at least EUR 1. A simple LLC must have legal reserves in which a quarter of profit (decreased by loss from the previous year) must be entered (such an obligation will cease to exist once a simple LLC increases its share capital to at least EUR 2,500). Administrative and notarial costs for establishment amount up to EUR 120.

From 1 September 2019, founders can establish an LLC completely online through the e-osnivanje app.

The share capital of the LLC must be paid-up with a credit institution in Croatia.

The corporate income tax rate in Croatia for 2024 is 10 % for revenues up to EUR 1m in the relevant tax period and 18 % for revenues exceeding this threshold.

The limited liability company (společnost s ručením omezeným; "LLC"). Among the advantages of the LLC is a very low minimum share capital contribution requirement of CZK 1 (approx. EUR 0.04), with 30 % to be paid-up at establishment. Therefore, the minimum share capital of a one-member LLC can be CZK 1. A higher contribution may be determined and recorded in the foundation deed (in the case of a one-member company) or articles of association (in the case of a company with multiple shareholders). It is also recommended to have share capital of at least CZK 50,000 (approx. EUR 1,950), which makes the company appear more credible.

The limited liability company (spółka z ograniczoną odpowiedzialnością; "LLC"). An LLC requires a minimum share capital of PLN 5,000 (approx. EUR 1,200). Shares in LLCs are not considered securities, and the minimum nominal value of a share is PLN 50 (approx. EUR 11.65). An LLC can be established by one or more shareholders, who can be natural or legal persons, Polish residents or foreigners (based on the rule of reciprocity). The management board can consist of at least one person, who can be a Polish resident or a foreigner. Since 1 March 2021, entrepreneurs can also establish simple joint-stock companies (prosta spółka akcyjna; "PSA"), which are another viable option for start-ups. A PSA can be incorporated with a minimum share capital of only PLN 1.00, making it easier to establish compared to a traditional joint-stock company, which requires a minimum share capital of PLN 100,000. Shares in PSAs are considered securities, which can be advantageous compared to LLCs. Additionally, shares in PSAs do not have a nominal value, providing more flexibility in ownership structure. PSAs can also be established by one or more shareholders, who can be natural or legal persons, Polish residents or foreigners (based on the rule of reciprocity).

In PSAs, non-monetary contributions to the share capital can include work or services performed for the PSA, which is not possible with LLCs.

The limited liability company (Societate cu Raspundere Limitata; "LLC") and joint-stock company (Societate pe Actiuni).

Given the significant difference of capitalisation requirements – RON 1 (approx. EUR 0.2) for LLCs compared to RON 90,000 for joint-stock companies (approx. EUR 18,000), the LLC is currently the most common legal form of start-up.

Although more rigid in respect to funding (i.e. LLCs cannot issue bonds and their shares cannot be publicly traded) and exit options (i.e. transfers of shares to third parties require the approval of shareholders holding at least 3/4 of the LLCs share capital, unless provided otherwise in the articles of association), LLCs offer a less formalistic, simpler corporate governance structure and, therefore, a lighter operating burden, which makes them more suitable for closely held businesses or ownership vehicles.

The limited liability company (družba z omejeno odgovornostjo; "LLC").

An LLC offers significant flexibility in terms of corporate law and is relatively easy to establish. The prescribed minimum share capital of an LLC is, generally, EUR 7,500. A quarter of the share capital must be paid up prior to incorporation. Incorporation with in-kind contributions only is possible. In addition, an expedited incorporation procedure is available for so-called simple LLCs (enostavne d.o.o.; entire share capital paid up upfront in cash, prescribed form used for constitutional document).

In contrast, the main disadvantage of an LLC compared to a joint-stock company (delniška družba; "JSC") lies in the absence of a corporate mechanism allowing for a unilateral exercise of a conversion option by the option holder. In JSCs, this can be achieved through corporate approval of convertible bond issuance and conditional share capital increase. However, these instruments, typically used in the context of public offerings, are not ideal for private convertible instruments, where several specifics of the conversion (particularly valuation) are usually unknown at the time of signing. Given this, along with the general rigidity of corporate rules applicable to JSCs and their significantly higher capital requirements, LLCs remain the preferred structure for start-up companies.

There have recently been initiatives to introduce a more flexible and streamlined corporate form in Slovenia (similar to the FlexCo model in Austria). However, these efforts have yet to materialise.

Lending is an activity reserved to licensed (or passported) credit institutions. There is no specific exemption for shareholder loans or intra-group financing. However, certain exemptions exist (e.g. for lending by AIFM/AIF acting within the scope of their AIFMD licence and for lending of subordinated loans). Careful structuring will be required to avoid legal hiccups.

Shareholder loans are generally permissible, but they should be carefully structured from both tax and accounting perspectives. A loan may be provided with or without interest and it must be at arm's length (like all related-party transactions). Thin capitalisation rules also must be considered.

In insolvency proceedings, a shareholder who has granted a loan ranking behind almost all other creditors.

Foreign shareholders' loans to Bulgarian companies must be registered with and annually reported to the Bulgarian National Bank for statistical purposes.

Shareholder loans are generally admissible in Croatia but there are several peculiarities and considerations that need to be taken into account when providing such loans. These include:

Capital maintenance rules: Croatian law imposes strict capital maintenance rules to protect the company's capital. Shareholder loans should not undermine the company's capital base.

Thin capitalisation rules: These rules limit the amount of debt that can be used to finance a company relative to its equity. Excessive shareholder loans may be reclassified as equity for tax purposes.

Transfer pricing regulations: Loans between related parties must be at arm's length terms. Interest rates and other terms should reflect what would be agreed upon between independent parties.

From a tax standpoint, shareholder loans are required to have at least a minimum interest rate, which is regulated annually.

Subordination: In the event of insolvency, shareholder loans may be subordinated to other creditors' claims. This means that shareholders may only be repaid after all other creditors have been satisfied.

Fraudulent conveyance: Loans made when the company is insolvent or that render the company insolvent may be subject to clawback under fraudulent conveyance rules.

Shareholder loans are generally permissible. A shareholder loan (including interest rate) must be on arm's length terms. If the interest rate is higher, the company cannot claim the interest as a tax expense, or it may not be recognised. Thin capitalisation rules also must be considered.

Shareholder loans are generally permissible in Poland, but should be carefully structured from both tax and accounting perspectives.

Loans from certain groups, such as members of the management board and supervisory board, require approval from the shareholders' meeting before becoming effective. Additionally, loans that are twice the value of the company's share capital may require special corporate consents.

As a principle, all companies engaged in lending as their main business activity generating revenues are subject to prior authorisation by the Romanian National Bank ("NBR").

A company providing loans will be required to hold a lending licence if the lending activity is provided on a professional basis, e.g. is done regularly, to multiple borrowers, with the assistance of internal structures designed to carry out lending activities for the purpose of making a profit.

While loans to affiliates are not expressly carved-out from the above-mentioned legal requirement, there is already an established practice on the Romanian market whereby loans between affiliates do not meet the legal requirements of professional lending. Additionally, shareholder loans are a common market practice for Romanian companies.

The following requirements should be considered:

• if the loan is granted by a non-resident to a resident for a period exceeding one year, notification to the NBR is required. Such notification is required for statistical purposes only (no NBR approval is necessary);
• being a transaction between related parties, the loan should be arm's length, i.e. bear a market rate interest.

Shareholder loans are generally permissible. However, in addition to tax and accounting aspects, consideration should be given to:

• equitable subordination rules – in the event of insolvency, a (direct or indirect) shareholder cannot claim repayment of the loan extended while the LLC was in crisis (i.e. "when a diligent businessperson would have provided equity financing"). Moreover, if repaid to the shareholder within a year preceding the opening of insolvency proceedings against that company, such a loan may be clawed back (irrespective of whether the general insolvency avoidance rules are met). The triggering status (notion of financial distress) is not specified further by black-letter law but is generally considered to be broader than technical insolvency – encompassing financial distress in the broader sense. For joint-stock JSCs, the rule applies to 25 % shareholders with voting rights. Since many start-ups are undercapitalised (and may thus qualify as being "in crisis"), shareholders should carefully assess the viability of early shareholder-provided debt financing; and
• capital maintenance rules – generally, a shareholder's loan should be on arm's length terms. Excessive interest rates and the like may qualify as covert profit distribution (prikrito izplačilo dobička) and deemed null and void (they are, generally, also not recognised as expenses for tax purposes and may be reclassified to dividend income and taxed accordingly). The respective rules are less strict for LLCs compared to JSCs.

Convertible loans for LLCs are not explicitly regulated under Austrian law. Therefore, they must be carefully structured to ensure enforceability and reduce related risks. For instance, all existing shareholders should accede to a convertible loan agreement and guarantee that they will procure conversion of the loan by way of a share capital increase. The conversion itself is typically structured by way of a cash capital increase (with the convertible investor being obliged to subscribe for the newly issued share) against (i) payment of the nominal amount of the newly issued share and (ii) waiver of the outstanding amount of the loan. A contribution in kind of the outstanding loan receivable is also possible but will require a valuation of the contributed loan receivable. Stamp duties of 0.8 % of the contributed loan receivable may also be triggered. Waiver of loans may trigger corporate income tax if the loan is considered as not collectible.

Convertible loans for LLCs are not explicitly regulated under Bulgarian law. Therefore, they must be carefully structured to ensure enforceability and reduce related risks. For instance, all existing shareholders should accede to a convertible loan agreement and guarantee that they will procure conversion of the loan by way of a share capital increase.

The conversion itself is structured either by way of a contribution in kind of the outstanding loan receivable or cash capital increase. A contribution in kind will require a valuation of the contributed loan receivable. A cash capital increase is structured as follows: the investor provides additional cash in the amount of the loan receivable and, once the cash capital increase is completed, the company repays the loan with the additional cash paid in by the investor in the cash capital increase procedure.

Any conversion of loans into equity is subject to the approval of the shareholders' meeting.

Convertible loans for LLCs are generally recognised in Croatia and are used as a financing tool, particularly in the context of start-up and venture capital financing. Since convertible loans are not explicitly regulated under Croatian law, they must be carefully structured to ensure enforceability and reduce related risks.

For instance, all existing shareholders should accede to a convertible loan agreement and guarantee that they will procure conversion of the loan. The company's articles of association and shareholder agreements should allow for the issuance of convertible loans and the subsequent conversion into equity. If the lender is a foreign entity, any cross-border financing regulations and tax implications must also be considered.

The conversion itself is typically structured by way of a share capital increase (with the convertible investor subscribing for the newly issued share) against payment (contribution in kind, i.e. receivable stemming from the loan) for the nominal amount of the newly issued share, practically debt-to-equity. A contribution in kind requires a valuation of the contributed loan receivable by an auditor appointed by the court (following the company's proposal).

Convertible loans for LLCs are not explicitly regulated under Czech law [NB: it is regulated for joint-stock companies]. Therefore, they must be carefully structured to ensure enforceability and reduce related risks. The most common requirements and conditions within investments in start-up companies are: (i) due date; (ii) interest rate; (iii) terms and conditions of conversion of the loan to the share (typically upon qualified financing, maturity and early conversion in change-of-control-like events); (iv) amount of the minimum and maximum possible valuation of the company; and (v) rights to be attached to the investor's share following the conversion (such as liquidation preference).

The conversion itself is typically structured by means of a monetary capital increase combined with equity capital contribution (příplatek mimo základní kapitál), with the investor being obliged to subscribe for the newly issued share, whereby the loan will be set-off against the amount of the capital increase and equity capital contribution.

Convertible loans (CLAs) for LLCs are not explicitly regulated under Polish law, so they must be carefully structured to ensure enforceability and mitigate related risks, such as tax-related risks.

The conversion is typically structured as a share capital increase with the convertible investor obliged to subscribe for newly issued shares. This is followed by a set-off of mutual claims, i.e. the company's claim from the share subscription and the shareholder's claim from the loan repayment, up to the amount of the lower claim. A contribution in kind of the outstanding loan receivable in exchange for shares in the increased share capital is also possible. In this case, the loan receivable is transferred to the company by way of assignment, making the company both debtor and creditor, leading to the expiration of the receivable. The tax consequences of both conversion mechanisms may vary.

Unless expressly excluded in the convertible loan agreement, the lender can claim repayment of the loan with interest. Therefore, it is important to decide whether loan interest should be covered by the conversion. To ensure the enforceability of the convertible investor's claim for conversion, either all start-up founders and other shareholders should be parties to the CLA, or the start-up, as the borrower, should assume guarantee liability for its shareholders to realise the share capital increase. Otherwise, shareholders may refuse to realise the conversion at the time of the conversion event, and the borrower will not bear liability for their actions as a third party. If the start-up assumes guarantee liability towards the investor, it should be secured with a guarantee payment, which, unless carefully structured, may be hazardous for the start-up and result in management board liability.

Even though CLAs initially focus on the loan and its conversion terms, they should also cover some boundary conditions on corporate governance to come into force upon conversion. Loans from certain groups, such as members of the management board and supervisory board, require approval from the shareholders' meeting before becoming effective.

Additionally, loans that are twice the value of the company's share capital may require special corporate consents.

Loan conversion into equity is expressly recognised by the Romanian Companies Law as a method for increasing a company's share capital.

The conversion of loans into equity is subject to the approval of the shareholders' meeting, to be adopted observing the quorum and voting requirements applicable to the increase of the share capital.

While the shareholders' approval issued upon the contracting of the loan could be interpreted as a pre-approval of the conversion itself, the actual implementation of the conversion will likely require a new resolution of the shareholders issued for the specific conversion.

Additionally, the registration of the share capital increase resulting from the loan conversion will require the confirmation of the auditor and/or financial/accounting department of the company, attesting the amount of the loan and its reaching of maturity.

Unless decided otherwise by the parties involved, the loan will be converted into shares at their nominal (registered) value.

Convertible loans for LLCs are not explicitly regulated under Slovenian law. Therefore, they must be carefully structured to ensure enforceability and reduce related risks.

For instance, all existing shareholders should accede to a convertible loan agreement and undertake to procure conversion of the loan by way of a share capital increase. To increase the robustness of the structure, the convertible loan agreement should take the form of a Slovenian notarial deed (notarski zapis) and may also entail a requirement for authorised capital (odobreni capital), giving the management a possibility to effectuate the conversion.

The conversion itself is typically structured by way of a contribution in kind of the outstanding loan receivable. The valuation requirement (which generally applies to contributions in kind) may be waived/omitted in certain cases. A cash capital increase (with the convertible investor being obliged to subscribe for the newly issued share) against (i) payment of the nominal amount of the newly issued share and (ii) waiver of the outstanding amount of the loan is also possible, subject to tax considerations. It is in principle also possible to apply different structures entailing set-off mechanisms.

The availability of different share classes depends on the type of corporate form you choose.

LLC: An LLC follows the single share concept where each shareholder is limited to holding only one type of share. Therefore, the creation of different classes of shares is only possible in a "synthetic" way, i.e. by contractual agreement, rather than by having separate classes of shares.

FlexCo: In contrast to the single share concept of the LLC, FlexCos allow for the issuance of fractional shares. This allows companies to create different classes of shares, giving shareholders the flexibility to hold shares of different classes, each with different rights and obligations.

The creation of different share classes in an LLC is only possible in a "synthetic" way, i.e. by way of contractual agreement conferring additional rights and privileges to a shareholder (also included in the articles of association) rather than having separate share classes.

In an LLC (unlike joint-stock companies) the creation of different share classes is only possible in a "synthetic" way, i.e. by way of contractual agreement rather than having separate share classes.

The creation of different share classes is explicitly permitted under Czech corporate law.

Shares in PSAs, joint-stock companies and LLCs can have different rights, such as voting rights, dividends and liquidation preferences. Shares with different rights are considered different classes of shares. The Polish Commercial Companies Code (Kodeks spółek handlowych) has strict regulations concerning the maximum preferences of shares, except for PSAs, where regulations do not explicitly define limitations. For example, each privileged share may carry no more than three votes in an LLC or two votes in a joint-stock company and may not exceed 150 % of the dividend attributable to ordinary shares in both LLCs and joint-stock companies.

Shareholders can also be granted personal rights, such as the right to appoint or dismiss management board members or supervisory board members, which are not tied to shares but to shareholders and are therefore not transferable. In PSAs and joint-stock companies, some shares can be classified as non-voting shares, which are privileged shares with the right to receive higher dividends. The conferring of special rights, both in the form of privileged shares and personal rights, can be contingent upon additional performances towards the company, the lapse of a specific period, or the fulfilment of a certain condition.

Usually, "share classes" with different rights are further regulated in the Investment Agreement by specifying liquidation preferences and other terms on an inter partes basis. PSAs and joint-stock companies allow share series (A, B, C, etc.), as the shares are considered securities. LLCs do not have share series, as the shares are not considered securities.

In a PSA, the concept of "founding shares" (akcje założycielskie) is introduced, ensuring that any subsequent issuance of new shares does not violate a certain minimum ratio of votes attributable to these preferred shares compared to the total number of votes attributable to all shares of the company. If an issue of new shares could violate this ratio, the number of votes of the founding shares is increased accordingly.

No. Under Romanian Companies Law there is only one class of shares, with equal rights.

The law also recognises the concept of "preferential shares" in joint-stock companies (acțiuni preferențiale cu dividend prioritar fără drept de vot) granting their holders preferential rights for the distribution of dividends, but only a right to attend (and not vote) in general meetings. Such shares are used to a lesser extent in practice, given the absence of efficient controlling rights for their holders.

Such "preferential shares" are subject to the following characteristics: (i) preferential right to obtain dividends, before any other payments out of the distributable profits; (ii) for up to a quarter of the share capital; (iii) not in favour of company directors; (iv) automatically turn into ordinary shares in case of delays in distributing the dividends.

In an LLC the creation of different share classes is possible in a "synthetic" way, i.e. by way of contractual agreement (typically included in the articles of association), rather than having explicitly separate share classes in the manner possible with JSCs.

Start-up companies (LLCs and FlexCos) typically have two corporate bodies: (i) the management board and (ii) the general assembly.

A supervisory board (supervising and cooperating with the management board) is mandatory only in certain circumstances (e.g. if size-related thresholds are met), whereas the general assembly may voluntarily establish such a corporate body. Start-ups typically do not need a supervisory board and do not voluntarily install one.

Start-up companies (LLCs) typically have two corporate bodies: (i) the managing directors and (ii) the shareholders' meeting.

Start-up companies (LLCs) typically have two corporate bodies: (i) the management board (uprava) and (ii) the shareholders' meeting (skupština). A supervisory board (nadzorni odbor), which supervises the management board, is mandatory only in certain circumstances (e.g. if a company has more than 200 employees or if a company has share capital above HRK 600,000 (approx. EUR 80,000) and has more than 50 shareholders), whereas the shareholders' meeting may voluntarily establish such a corporate body. Start-ups typically do not need a supervisory board and do not voluntarily install one.

Start-up companies (LLCs) typically have two corporate bodies: (i) the managing directors and (ii) the shareholders' meeting. A supervisory board (supervising and cooperating with the managing directors) is mandatory only in certain rare circumstances (e.g. if the company trades with securities or organises the regulated market, or, under certain conditions, if it takes part in cross-border transformations), whereas the shareholders' meeting may voluntarily establish such a corporate body. Start-ups typically do not need a supervisory board and do not voluntarily establish one (unless this is driven by specific investor needs).

Start-up companies in the form of LLCs typically have two corporate bodies: (i) the management board and (ii) the shareholders' meeting. A supervisory board in LLCs is mandatory only in certain circumstances, such as when size-related thresholds are met. However, the shareholders' meeting may voluntarily establish a supervisory board. In PSAs, the supervisory board is an optional corporate body. In contrast, a supervisory board is mandatory for start-up companies structured as joint-stock companies.

The mandatory corporate bodies of an LLC are (i) the shareholders' meeting, and (ii) the directors.

Although not expressly provided under the Romanian Companies Law, the shareholders of an LLC may determine different types of meetings in the articles of association.

Although not expressly provided (or prohibited) under the Romanian Companies Law, in practice, the directors of an LLC can be organised under a board of directors. The organisation of the directors into the collective body of the board of directors should be contractually regulated for LLCs. However, certain Romanian Trade Registries have been reluctant to organise the directors of an LLC into a board of directors, arguing that this organisation is only valid for joint-stock companies.

In the case of joint-stock companies, the Romanian Companies Law expressly provides for two types of meetings (i.e. ordinary meetings and extraordinary meetings) each with its own quorum and voting requirements.

With respect to the directors of joint-stock companies, the Romanian Companies Law requires them to organise themselves into the collective body of the board of directors.

The two-tier management system (directorate and supervisory board) is applicable only to (large) joint-stock companies that expressly choose the two-tier management system.

Start-up companies (LLCs) typically have two corporate bodies: (i) the management (poslovodstvo), consisting of a single or more directors, and (ii) the shareholders' meeting. The formation of a supervisory board in LLCs is optional and typically not done in start-ups.

It is in principle also possible to establish other contractual bodies, such as an investment committee, advisory board, etc. However, due to the lack of default statutory rules, these require a comprehensive contractual regulation, and, therefore, are not commonly employed in practice.

The shareholders of an LLC and FlexCo may establish an advisory board that either serves as a supervisory board (and thus qualifies as a corporate body) or is based on contractual agreement only. Contractual advisory boards are commonly installed to advise the founders of a start-up in their day-to-day operations. An advisory board that has the functionality of a supervisory board (consent rights) would be subject to the rules applicable to supervisory boards (relating to the liability of its members). This is typically avoided. In the case of advisory boards with mere advisory functions (no approval rights), certain specific (limited) approval rights granted to the advisory board should be fine.

For more information, see here.

The shareholders of an LLC may establish an advisory board that is not a corporate body but is based on contractual agreement only (e.g. articles of association or shareholders' agreement).

The establishment of an advisory board is not common among start-ups.

Shareholders in an LLC have much more autonomy in arranging their relationship within a company than in joint-stock companies.

The shareholders of an LLC may establish an advisory board that either serves as a supervisory board (and thus qualifies as a corporate body) or that is based on contractual agreement only (e.g. articles of association or shareholders' agreement).

The establishment of an advisory board is not common, but provision of advice by investors is. The investor's representative gets a seat on the management board to be able to either steer or supervise business operations.

Although it is not common in the Czech Republic, an LLC may establish non-mandatory bodies such as an advisory board. The powers of such bodies are always limited by the authority of the mandatory bodies.

Shareholders of a start-up company can establish an advisory board. This board can either function as a supervisory board (thus qualifying as a corporate body) or be set up alongside or instead of a supervisory board based solely on a contractual agreement. It is common for start-ups to install contractual advisory boards to provide guidance to the founders in their day-to-day operations. If an advisory board functions as a supervisory board with consent rights, it must adhere to the rules applicable to supervisory boards, including those related to the liability of its members. For advisory boards with purely advisory roles (without approval rights), granting limited approval rights is generally acceptable, but will have contractual rather than corporate significance.

The advisory board is not a regulated concept either for joint-stock companies or LLCs. Hence, for an advisory board to operate, it will need to be contractually established.

An advisory board may be an efficient alternative for shareholders to boost their business. They also offer their members the advantage of less exposure to liability. Conversely, a position in the corporate body of a company, be it as a director or executive member, may trigger liability issues for its holder.

An advisory board is not a regulated corporate law concept per se. However, any of the following can perform equivalent functions:

• supervisory board – functions as a regular corporate body and can, in principle (subject to conflict-of-interest rules), assume an advisory role (in particular to the shareholders). Although its statutory powers may be tailored to better fit the nature of an LLC, a supervisory board is optional for LLCs and thus only rarely used by start-ups;
• supervisory board committees – a supervisory board (assuming one is established) may form specialised committees which advise it in specialised areas, such as audit and appointments; such committees may include outside experts. Committees are very rare in start-ups (they presuppose the formation of a supervisory board); and
• contractually or informally engaged advisors – typically serve as consultants. Conflict of interest and capital maintenance rules should be taken into account insofar as shareholders or members of other corporate bodies act as contractually engaged consultants. In terms of market practice, convertible debt documentation used by the Slovene Enterprise Fund requires the borrower to set up an expert committee (acting exclusively in an advisory capacity without management or supervisory functions and without remuneration).

Investors looking for decisive influence on the start-up's business decisions typically take management board seats or install wide-ranging approval and veto rights to the benefit of the shareholders in the articles of association.

Members of a contractual advisory board are typically only liable based on an agreement with the company or the nominating shareholder. Since an advisory board is not a corporate body, it has no statutory liability towards the company or its shareholders.

The members of an advisory board may be compensated based on an agreement with the company or the nominating shareholder.

Members of an advisory board may be liable towards the company if they use their influence to the company's detriment. Their liability may also be established on a contractual basis.

Members of a contractual advisory board (non-employees) may be liable towards third parties only if the advisory board is requalified as a supervisory board and provided that the third party cannot settle its claim from the company.

Advisory board members should be able to be compensated on a contractual basis.

As mentioned above, the establishment of an advisory board is not very common in the Czech legal environment and Czech law does not explicitly regulate their liability towards the company or third parties. Members of the statutory body (e.g. managing directors) will always generally be liable, even for actions taken based on the advice of the advisory board. However, in the case of damage being caused by the advice of the advisory board, the company could seek compensation from the members of the advisory board based on the general statutory provisions for recovery of damages (although this is not tested in practice).

As regards the compensation of board members, reimbursement of expenses is permissible.

Members of a contractual advisory board are generally only liable if the advisory board is reclassified as a supervisory board or if there is a specific agreement with the company.

In such cases, their duties are governed by the Polish Commercial Companies Code (Kodeks spółek handlowych). These duties include:

(i)        duty of care: this is subject to the business judgment rule, which protects board members from liability if they make decisions in good faith and in the best interest of the company.

(ii)        duty of confidentiality: board members must keep company information confidential.

If the advisory board members fail to properly supervise the start-up's operations, they may be held liable. This liability is towards the start-up itself, not towards the shareholders or third parties, except under tort law. Members of a contractual advisory board that is not classified as a supervisory board are not liable, except under tort law.

Advisory board members may be compensated in one of two ways:

Based on an agreement with the company: this could be through an employment contract or a civil law contract. As a member of the supervisory board: If the advisory board is reclassified as a supervisory board, members may receive compensation accordingly.

The general rule is that the company is liable towards third parties for all acts and deeds performed or executed by its management during the exercise of their duties and not the directors/managers personally.

Personal liability of the management in relation to third parties may occur in strictly regulated circumstances, in particular in case of insolvency/bankruptcy or tax insolvency, and is premised on the wilful misconduct of the manager in question.

The advisory board may be held liable by the company either based on contractual liability (if a form of contractual arrangement exists) or for tort. In both cases, liability will not be presumed, and the burden of proof will lie with the company. Additional conditions consisting of (i) the existence of a form of guilt (intention or negligence), (ii) damage, and (iii) the link between the advisor's breach and the damage will also require evidence for liability to be triggered.

As regards compensation, their mandates may or may not be remunerated. The tax implications of such a structure should also be considered.

Supervisory board members are subject to a general statutory duty of care and may be liable to the company or its creditors (in the event of the company's insolvency).

In principle, external supervisory board committee members as well as external advisors may be liable towards the company on the basis of (i) shadow director liability (typically very rare, since intent to cause harm is required) or (ii) general liability for breach of contract (typically a mandate). External supervisory board committee members are not explicitly liable for breaches of statutory fiduciary duties.

Both the supervisory board members and members of the supervisory board committees (either internal or external) may be remunerated for their work (in addition to reimbursement of their expenses), subject to a decision of the shareholders' meeting, a provision in the articles of association or, in case of external committee members, a supervisory board resolution.

Employee participation programmes in an LLC are typically structured as virtual share programmes (i.e. a contractual bonus entitlement). However, it is also possible to structure participation programmes using participation rights. The benefit of using participation rights is that the holders can be treated as shareholders with no voting or other minority rights and without special formal requirements (no notarial deed is required).

With the introduction of the FlexCo, there is now a new option for employee participation. The FlexCo makes it possible to issue so-called company value shares (CVS). These are shares in the company primarily designed for employee participation that generally do not confer voting rights, but only the right to participate in general assemblies. CVS are particularly interesting in combination with tax changes that the legislator has adopted as part of the start-up package alongside the introduction of the FlexCo.

Employee participation programmes are not typical instruments in Bulgarian start-ups (LLCs). If any, they are typically structured as contractual bonus entitlements. This is partly due to relatively inflexible formalities required to implement a share option plan in an LLC.

Employee participation programmes are typically structured as individual or group incentive plans (e.g. bonus entitlements), gain sharing, profit sharing and employee stock ownership (usually connected with profit sharing).

The benefit of using participation rights is that the holders can be treated as shareholders with no voting or other minority rights.

Employee participation programmes are not typical instruments in Czech start-ups. If any, they are typically structured as virtual share programmes (i.e. a contractual bonus entitlement).

Although it is possible to structure participation programmes through the issue or transfer of shares, these have not been common in practice due to the lack of regulation addressing various specificities inherent in employee participation programmes (including tax-related issues).

A last-minute change in legislation effective as of 1 January 2024 introduced the concept of deferred taxation of income from vested shares to the occurrence of the earliest of these seven events: (i) termination of employment; (ii) winding-up of employer; (iii) change of tax residency of the employer or employee; (iv) transfer of the vested share or option; (v) exercise of option; (vi) exchange of the vested share in which the total nominal value of the employee's share changes; and (vii) long-stop date of 10 years since the acquisition of the vested share or option.

However, as the existing traits of the current system remain in place (e.g. the income from vested shares or options still being subject to mandatory public payments – health insurance and social security) and several aspects of employee participation programmes commonly used in practice are not addressed at all (e.g. use of dedicated SPVs holding the participation pool), further changes in regulations covering employee participation programmes (including taxation) are envisaged to be adopted in the course of 2024. It is therefore prudent to carefully consider the impact of the current regulation and any potential changes.

Employee participation programmes are structured either as securities programmes (e.g. option pools, particularly for shares to be issued by the start-up or phantom share programmes (i.e. a contractual cash bonus entitlement, where the bonus amount is tied to the start-up's valuation, or a contractual obligation of a shareholder to sell shares to an ESOP participant).

In PSAs and joint-stock companies, option pools may cover shares (including non-voting shares) and/or warrants. The company can easily buy back its own shares, which simplifies the operation of the programmes. Additionally, the laws in these types of companies provide for a squeeze-out mechanism, which is an effective way to secure the start-up itself.

In LLCs, option pools are more complicated. Non-voting shares and warrants are not permissible. The company cannot buy back its own shares, and there is no squeeze-out mechanism. Given these restrictions, phantom share programmes are much more popular in LLCs. Moreover, the tax consequences must always be considered, as option pool programmes in LLCs may result in excessive burdens.

The structure depends on the company’s objectives, whether the plan is set to remunerate long-term or short-term performance, and the capital structure (ordinary shares or preferential shares). Stock option plans may be used to reward the long-term performance of employees.
Employee participation programmes are typically structured as virtual share programmes (i.e. a contractual bonus entitlement). However, it is also possible to structure participation programmes using participation rights, which are more common in publicly listed companies (joint-stock companies).

Employee participation programmes in LLCs are typically structured as contractual bonus entitlements. This is partly due to relatively inflexible formalities required to implement a share option plan in an LLC (which is somewhat more straightforward to put in place in a JSC). Founders and early key personnel will in any case already hold equity in the start-up.

Employee profit participation schemes can also be implemented in accordance with the Employee Participation in Profit Sharing Act (Zakon o udeležbi delavcev pri dobičku) in order to qualify for certain tax benefits applicable to such compensation. LLCs can only take advantage of cash-based schemes; share schemes are also available for JSCs. The pay-out per worker is limited to EUR 5,000 per year.

While in recent years there have been several amendments to tax legislation concerning the treatment of share acquisitions by employees, the tax treatment of such transactions remains a key factor hindering the wider adoption of employee participation schemes in Slovenia. That said, according to publicly available information, the government is currently preparing a new legislative package aimed at facilitating both (i) Employee Stock Ownership Plans (ESOP), notably by enabling employees to acquire (a portion of) the company through a special entity/cooperative using financial leverage, and (ii) Employee Stock Purchase Plans (ESPP), primarily by introducing tax incentives for various ESPP schemes.

Employee participation programmes should be carefully structured from a tax perspective. In addition, the principle of equal treatment and non-discrimination of employees should be considered. The eligibility criteria for performance-based compensation / bonus schemes should ideally be defined and communicated in advance (via the company's internal acts).

Employee participation programmes should be carefully structured from both a labour law and tax perspective. Vesting agreements can have significant tax consequences, particularly regarding income tax on vested shares or options.

The maximum amount of a non-taxable annual bonus that employers may pay out to their employees is specified each year (for 2024 it amounts to EUR 1,120).

In addition, the principle of equal treatment of employees should be considered (i.e. it should be properly documented which employees received which benefits and for what reason).

Employee participation programmes should be carefully structured from a tax perspective taking into consideration the impact of early triggers / good leaver events (see also section 3.1). In addition, the principal of equal treatment of employees should be considered (i.e. it should be properly documented which employees received which benefits and for what reason). Finally, capital markets requirements must be considered (e.g. exemptions from the prospectus publication duty).

Employee participation programmes should be carefully structured from a tax perspective. Furthermore, some employee participation programmes are not explicitly regulated under Polish law. All agreements with employees/managers should therefore be precisely drafted to avoid subsequent disputes.

If the employee participation programme takes the form of an option pool, the founders and shareholders must implement relevant provisions that will protect them against unfair or adverse actions of the ESOP beneficiaries that have become shareholders in the execution of the programme, such as: compulsory redemption of ESOP shares in case of pre-defined misconducts, claw-back options 

regarding ESOP shares, lock-ups and other restrictions regarding ESOP shares transfers, etc.

Moreover, employee participation programmes in the form of option pools must always provide for a maximum number of shares to be issued within a programme; otherwise, they may deter future investors who cannot accurately calculate their participation on a fully diluted basis.

When implementing employee participation programmes, the company should consider any tax implications.

In addition, if the programme is not addressed to all employees, it should be properly documented which employees received which benefits and for what reason (the employees must be given equal treatment, otherwise the company may face sanctions for discrimination).

If a joint-stock company wishes to implement a participation programme, specific corporate aspects should be considered, such as:

• the maximum number of shares that can be acquired by the company (max. 10 % of the subscribed share capital);
• the period during which the acquisition of shares will take place (max. 18 months);
• the minimum and maximum price per share to be paid by the company;
• payment of shares only from distributable profits or available reserves according to the latest financial statements;
• shares acquired by the company for employees must be distributed to the employees within 12 months from the acquisition.

Payouts under an employee participation programme will be subject to regular personal income tax rates, unless structured in accordance with the criteria of the Employee Participation in Profit Sharing Act (in which case certain tax benefits may apply).

In addition, the principle of equal treatment and non-discrimination of employees should be considered. The eligibility criteria for performance-based compensation / bonus schemes should ideally be defined and communicated in advance (via the company's internal acts).

Subject to certain conditions, perquisites (boniteta) in the form of an employee's right to purchase shares may qualify for more favourable tax treatment (with only 65 % of the perquisite's value being considered for tax purposes).

Founders are typically subject to a reverse vesting arrangement, i.e. they receive/hold their shares from the beginning of the vesting period and obtain the right to keep their shares during it. Therefore, if a founder leaves the company during the vesting period, they must transfer a portion of the unvested shares to another shareholder in accordance with the vesting terms.

A common vesting schedule would normally be an arrangement with good/bad and grey leaver events with a four-year vesting with a six- to 12-month cliff followed by monthly/quarterly vesting until the end of the vesting period. This may vary in individual cases, as it often depends on whether and to what extent the founders have already invested in the company themselves, how long they have committed full time to the company and other notable factors.

In case of an exit transaction before the end of the vesting period, the vesting period is usually accelerated. This is sometimes combined with a condition that the founder must remain with the company for a certain period of time at the buyer's request (this is often referred to as single- and double-trigger acceleration).

The same applies to any equity employee participation programmes or the issuance of company value shares (CVS). In a virtual share programme, a typical (forward) vesting structure is applied, i.e. the beneficiaries receive their entitlement over time during the vesting period. A cliff of 12 months typically applies to vesting terms.

Founders typically are not subject to vesting agreements. Founders retain shares in the company when investors enter the company. There are other protective mechanisms agreed in a shareholders' agreement or investment agreement aimed at retaining or incentivising the founders, such as bad leaver provisions or a call option for the founders to repurchase their shares from the investor if certain conditions are fulfilled, e.g. the company has reached a minimum internal rate of return agreed with the investor.

Vesting agreements, though not explicitly stipulated in the law, may be contractually entered into with employees of the company. The beneficiaries receive their contractual entitlement to purchase shares over time during the vesting period.

According to the publicly available information, some typical vesting arrangements implemented in Croatia are:

1. Time-based vesting

This is the most common type of vesting arrangement. Employees earn their equity over a specified period, often referred to as the "vesting period." For example:

Four-year vesting with a one-year cliff: Employees earn 25 % of their equity after the first year (the "cliff"), and the remaining 75 % is vested monthly or quarterly over the next three years.

Monthly or quarterly vesting: After the initial cliff period, equity may vest in equal monthly or quarterly instalments.

2. Performance-based vesting

In this arrangement, vesting is contingent upon the employee or the company meeting certain performance milestones. These milestones could include:

Revenue targets: Vesting occurs when the company reaches specific revenue goals.

Project completion: Vesting is tied to the successful completion of key projects or milestones.

Individual performance: Vesting is based on the employee achieving specific performance metrics or objectives.

3. Hybrid vesting

A combination of time-based and performance-based vesting. For example, an employee might need to stay with the company for a certain period and meet specific performance targets to fully vest their equity.

4. Accelerated vesting

This provision allows for the acceleration of the vesting schedule under certain conditions, such as:

Change of control: If the company is acquired or undergoes a significant change in ownership, employees may have their vesting accelerated.

Termination without cause: If an employee is terminated without cause, they may receive accelerated vesting of their equity.

5. Reverse vesting

This is typically used for founders or key executives. In this arrangement, the individual initially owns all their equity, but it is subject to repurchase by the company if they leave before a certain period. Over time, the company's right to repurchase diminishes, effectively "vesting" the equity back to the individual.

Founders typically hold (the respective fraction) shares from investor entry into the company. The general terms of employee share incentive plans are typically agreed in a shareholders' agreement and then implemented in the underlying employment documentation (e.g. bonus schemes).

Reverse vesting arrangements may be requested by the investors in particular instances but are not common. If applicable, these are structured as call options triggered by the failure to meet certain milestones and/or a breach of undertaking in the investment/shareholders' agreement.

Vesting terms of employee participation programmes customarily include a two- to four-year vesting period with a six- to 12-month cliff.

Usually, ESOP beneficiaries acquire their rights, either to a security (in the case of option pools) or to a bonus gradually, in equal instalments, upon the lapse of pre-defined time periods (so-called cliff periods). Therefore, they acquire their rights only after the cliff periods. Moreover, they are usually subject to further conditions that are verified at the end of each cliff period. These conditions include retention, lack of misconduct, etc. Vesting stops upon the occurrence of so-called good leaver or bad leaver events. In the latter case, the ESOP participant also loses all the rights already acquired.

Sometimes, ESOP beneficiaries are subject to a "reverse" vesting arrangement, i.e. they receive/hold their shares from the beginning of the vesting period and obtain the definitive right to keep their shares during it. If a founder leaves the company during the vesting period, they must transfer a portion of the unvested shares to another shareholder in accordance with the vesting terms. If they leave as a bad leaver, they must transfer all the shares back, both vested and unvested.

For founders, immediate vesting is the most common arrangement, i.e. founders will have 100 % ownership of the shares immediately from incorporation.

For company directors or personnel, the stock option incentive is expressly defined in the Fiscal Code as a programme initiated within a company through which the employees or directors of the company or its affiliates are granted the right to purchase stock at a preferential purchase price or to be issued a number of free shares. To benefit from the tax incentives for such stock option plans, a cliff of 12 months typically applies to vesting terms, i.e. the vesting scheme has a one-year cliff, after which the participant may either receive their shares for free or at a discounted rate or receive a cash settlement based on the share price. Usually, the stock option may be exercised at a price below the market value, thus providing an immediate profit, save for lock-up clauses, which may restrict the beneficiary from selling the shares for a certain period.

Certain structures that would qualify as reverse vesting arrangements may also be put in place if specifically requested by investors but are not common in practice. If applicable, such reverse vesting arrangements are usually structured as call options triggered by the failure to meet certain milestones and/or a breach of undertaking in the investment/shareholders' agreement.

Founders are typically subject to a reverse vesting arrangement, i.e. they receive/hold their shares from the beginning of the vesting period and obtain the right to keep their shares during or at the end of this period. Therefore, if a founder leaves the company during the vesting period, they must transfer a portion of the unvested share to another shareholder in accordance with the vesting terms. Cliffs vary in duration and may be as long as 36 months for good leavers and even unlimited for bad leavers (e.g. under the Slovene Enterprise Fund template documentation). In a contractual bonus scheme, a typical (forward) vesting structure is more commonly applied, i.e. the beneficiaries receive their entitlement over time during the vesting period.

Besides careful tax structuring, investors should consider that vesting agreements may not be enforceable vis-à-vis persons that qualify as "consumers" if there is a (significant) mismatch between the fair value of the shares and the consideration payable in case of a leaver event. The leaver may thus challenge the execution of the leaver option based on laesio enormis. This risk is usually countered by contractual assurances and exclusions.

Vesting agreements should be carefully structured from the tax perspective.

Vesting agreements should be carefully structured from the labour law and tax perspective (please see above under 3.2). The aspects to keep in mind are:

• Respecting employee's rights under labour law, such as rights to fair wages, working conditions and termination procedures.
• The vesting agreement must be drafted in a clear and detailed way, specifying the vesting schedule, conditions for vesting and any forfeiture provisions.
• Vesting agreements often involve stock options or equity compensation, which might be subject to income tax. In that respect, the timing of taxation (e.g. at grant, vesting or exercise) should be carefully considered.
• Equity compensation may also be subject to social security contributions, so these should also be considered from both the employer's and employee's perspective.

Any new shares issued because of a vesting agreement must be in line with the company's articles of association and shareholders' agreement and must not infringe on the rights of the existing shareholders.

Besides careful tax structuring (see also section 3.1), the wording of the vesting agreement must be as specific as possible. Written form is highly recommended. If funds from joint matrimonial property are used in the participation programme, the consent of the spouses is required.

The tax implications of a vesting agreement should be carefully analysed. Vesting arrangements are usually included in the employee participation agreement (e.g. share option agreement or phantom share agreement) concluded between the company and the founder or employee directly.

Stock options are non-transferable and do not grant rights attaching to the shares before vesting/exercise (e.g. voting or dividend rights). The persons entitled to be granted stock options must usually satisfy certain eligibility criteria (e.g. seniority, performance indicators, continuous service with the company for a specific period, no disciplinary action). Clawback provisions are customary for such stock option plans.

Restricted stock participants are granted shares at a discounted price from the current market price but are restricted from selling the stock for a certain period or to certain persons or face limitations on the volume of shares that can be sold within a certain timeframe or need to offer the shares first to the existing shareholders.

From the perspective of Romanian capital markets legislation, certain disclosure requirements towards the Romanian National Securities Commission and the Romanian exchange should be applicable if the company is also listed on a Romanian stock market.

A 12-month cliff period is required for the stock option, subject to the tax benefits provided under Romanian law (i.e. treatment as a non-taxable benefit upon the offer and the vesting of the options).

Granting of preferential shares is allowed.

As with any contractual arrangement under Slovenian law, a leaver could claim the presence of a (significant) mismatch between the fair value of the shares and the consideration payable in case of a leaver event (laesio enormis). This concept is rarely allowed by the courts, however, and the risk is mainly present in a unicorn-type scenario.

It is recommended that any provisions stipulating a compulsory disposal of a share be recorded in a notarial deed.

To the extent the shares (or funds used to acquire these) constitute joint matrimonial property, the cooperation of the spouse and certain additional steps are required to increase robustness.

Vesting arrangements should be assessed from the tax perspective as well.

Six weeks (for follow-up rounds by existing investors) to six months (larger rounds, new investors with due diligence requirements, intense negotiations). Bridge rounds are typically faster. In some cases, if there are no negotiations and only the term sheet is implemented, it may take only one to two weeks.

Six weeks (for follow-up rounds by existing investors) to six months (larger rounds, new investors with due diligence requirements, intense negotiations).

Six weeks (for follow-up rounds by existing investors) to six months (larger rounds, new investors with due diligence requirements, intense negotiations).

Six weeks (for follow-up rounds by existing investors) to six months (larger rounds, new investors with due diligence requirements, intense negotiations). Bridge rounds are typically faster.

Two to four months depending on the investor(s), due diligence, negotiations, necessary approvals, founders, previous investors (existing shareholders).

Depending on the financing round it may take from four weeks (existing investors) up to six to nine months (new investors with due diligence requirements, round A, round B funding). Bridge rounds may take less than six months.

Depending on the specifics of the transaction, the closing of an equity financing round can take between six weeks (for follow-up rounds by existing investors) to six months (larger rounds, new investors with due diligence requirements, intense negotiations). The timeline may be longer for particularly complex transactions (e.g. requiring regulatory approvals, involving several jurisdictions, etc.) or shorter for bridge rounds.

Investment agreement, shareholders' agreement, articles of association, IP transfer deed, capital increase documentation. For more information on these documents, please see here.

Investment agreement, shareholders' agreement, share subscription agreement, articles of association and capital increase documentation.

Investment agreement, shareholders' agreement, articles of association, IP transfer deed, capital increase documentation and share takeover documentation.

Investment agreement, shareholders' agreement, articles of association and capital increase documentation.

Investment agreement, shareholders' agreement, articles of association, IP transfer deed, capital increase documentation, statement on shares subscription and, sometimes, the employee participation programme and management contracts for the founders.

Investment agreement or convertible loan agreement, memorandum of understanding, shareholders' agreement, articles of association, IP transfer deed and capital increase documentation or stock transfer documentation.

Investment agreement, shareholders' agreement, articles of association, IP transfer deed and capital increase documentation (including a subscription agreement).

This depends on the type of corporate form you choose.

LLC: Rights and obligations relating to the transfer or acquisition of shares in an LLC require an Austrian notarial deed (Notariatsakt). This means that the investment agreement, shareholders' agreement and the subscription agreement need to be recorded as a notarial deed. The same applies to share transfer agreements.

FlexCo: In contrast to the LLC, rights and obligations relating to the transfer or acquisition of shares in a FlexCo do not require a notarial deed but only a private deed executed by either an attorney or a notary, provided the legality of the transaction is verified and the parties are advised of the legal consequences. This means that the investment agreement, shareholders' agreement and subscription agreement need to be recorded only as a private deed. The same applies to share transfer agreements.

Investment agreement, shareholders' agreement, share subscription agreement and articles of association may be signed in simple written form. Any transfer of shares requires notary certified signatures and content (but no notarial deed).

Any transfer of shares and capital increase must be registered with the Bulgarian Commercial Register.

The articles of association, decision on capital increase and share takeover statement will need to be in the form of a notarial deed (javnobilježnički akt) or certificated private deed (solemnizacija).

The signature on the IP transfer deed needs to be certified.

Creditors may also want to notarise the investment agreement.

Czech law requires notarised signatures on share transfer agreements (i.e. notarial deed is not necessary). A notarial deed is required for a capital increase. The form of the other documents, such as investment agreement or shareholders' agreement, is not stipulated by law, but it is recommended to sign them at least with notarised signatures.

In general, the investment and shareholders' agreement could be signed in a simple written form. But in practice it is usually executed with signatures certified by a notary public.

The capital increase documentation must be in the form of a notarial deed. This is also the case for subscription statements in LLCs. In PSAs and joint-stock companies, the share subscription agreement is concluded by means of an offer to subscribe for shares by the company and its acceptance by the designated addressee. In all cases, subscription for the shares may not be subject to a condition or deadline. Capital increases are effective upon registration in the Commercial Register. A resolution on increasing share capital may not be filed with the registry court after six months have lapsed from its adoption. However, in PSAs, newly issued shares come into existence upon registration made by the management board.

Share transfer agreements must be executed with signatures certified by a notary public and are effective upon the execution of the share transfer agreement.

Share transfer agreements concerning shares in joint-stock companies must be executed in at least written form and are effective upon the making of an entry in the register of shareholders kept by a brokerage house, indicating the buyer and the number of shares acquired and their identifying designations, i.e. type and series.

Share transfer agreements concerning shares in PSAs must be executed in documentary form under pain of nullity and are effective upon the making of an entry in the register of shareholders indicating the buyer and the number and type, series and numbers of shares acquired.

No legal formalities will be required for signing the investment agreement, memorandum of understanding, shareholders' agreement, articles of association or subscription agreement, as long as the equity funding will consist of cash. However, a stock transfer or share capital increase must be recorded with the Romanian Trade Registry, which involves certain formalities.

Agreements regarding the transfer or acquisition of shares in an LLC must be executed in the form of a notarial deed (notarski zapis). The same requirement applies to the subscription agreement/statement (pogodba/izjava o prevzemu vložka), the articles of association (družbena pogodba) in (multi-shareholder) LLCs, and any agreements facilitating put or call options in an LLC.

Given the nature of these agreements, it is also common practice for investment agreements and shareholders' agreements concerning LLCs to be concluded in the same notarial form.

Capital increases become effective upon registration with the Slovenian court and commercial registers (sodni register in poslovni register).

Except for advisor fees, a capital increase will typically trigger ancillary costs (notary, court registration fees) of EUR 3,000 – 5,000 net. For smaller rounds, fees can be lower.

Except for advisors' fees, a capital increase will typically trigger ancillary costs – Commercial Register fees are negligible (EUR 15) but translation costs could vary depending on the number of foreign investors involved. Share transfers will also trigger a notary fee of up to EUR 3,000 (excl. VAT), depending on the materiality interest.

Except for advisor fees, external costs (notary, court registration fees) may amount to anywhere from EUR 1,000 to EUR 4,000.

Except for advisor fees, a capital increase will typically trigger ancillary costs (notary, court registration fees), which are derived from the amount of the increased capital ranging from approx. EUR 800 (in case of an increase of at least EUR 4,000) up to EUR 8,000 net (in case of an increase of more than EUR 800,000). For smaller rounds, fees may be lower.

Except for advisors' fees, a capital increase will typically trigger ancillary costs (notary and court registration fees) of EUR 2,000 net (depending on the number of new shareholders and the amount involved). For smaller rounds, fees can be lower.

An increase in the share capital of LLCs and joint-stock companies will be subject to civil law transaction tax (podatek od czynności cywilnoprawnych) at the rate of 0.5 % on the taxable amount, which is the value by which the share capital was increased. A sale of shares is also subject to civil law transaction tax (PCC) at the rate of 1 % on the taxable amount, which is the market value of the sold shares. This tax is paid by the buyer.

Additionally, translation costs should be considered.

Except for advisor fees, a capital increase will typically trigger ancillary costs (notary, court/commercial register fees) of approx. EUR 2,500 – 4,500 (net of VAT). The notarial fees depend on the numbers of documents to be recorded as a notarial deed and on the deal value. For smaller rounds, fees can be lower.

Due to strict capital maintenance rules, a start-up company may not be able to provide representations and warranties during a capital increase. Therefore, it is common for the founders and existing shareholders to provide representations and warranties rather than the start-up company. Existing angel and financial investors typically provide only fundamental warranties (regarding their ability to enter into the transaction documents), whereas founders also give operational representations. Liability is typically capped (at a very intensively negotiated level; for founders, typically a multiple of their annual salary is used as a reference for the cap amount).

Representations and warranties are usually provided in the investment and shareholders' agreement. Usually, the company, the founders and existing shareholders provide representations and warranties. Existing angel and financial investors typically provide only fundamental warranties (regarding their capacity to enter into the transaction documents and title to shares), whereas the company and the founders also provide operational representations. Liability is typically capped (at a very intensively negotiated level).

They are very limited. Usually warranties by shareholders on non-compete / non-solicitation.

Due to capital maintenance rules, a start-up company may not be able to provide representations and warranties during a capital increase. Therefore, it is common for the founders and existing shareholders to provide representations and warranties rather than the start-up company. Existing angel and financial investors typically provide only fundamental warranties (regarding their ability to enter into the transaction documents), whereas founders also provide operational/management representations. Liability is typically capped.

Representations and warranties are usually provided in the investment and shareholder agreement. Typically, the start-up, the founders and existing shareholders provide representations and warranties related to fundamental warranties (regarding their ability to enter into the transaction documents, title to shares and lack of encumbrances) and operational/business matters. Existing angel investors and financial investors typically provide only fundamental warranties. Liability is typically capped (at a very intensively negotiated level; for founders, typically a multiple of their annual salary is used as a reference for the cap amount). Information properly disclosed during due diligence releases liability for the breaches revealed. The liability usually lasts for 24 months, apart from fundamental warranties, where a five- to six-year limitation applies.

It is usually common for founders to provide fundamental warranties (regarding the title to shares and their ability to enter the transaction) and business warranties (related to general corporate information, contracts and commitments, regulatory and compliance, any litigation or disputes, accounts, assets, IP, IT, insurance, etc.).

Existing angel and financial investors typically provide only fundamental warranties (regarding their ability to enter into the transaction documents).

Liability is typically capped (for founders, typically a multiple of their annual salary is used as a reference for the cap amount).

Due to capital maintenance considerations, the representations and warranties are commonly provided by the founders (alongside the company or on a standalone basis), either in the investment agreement (for equity investments) or in the loan agreement (for convertible loans). Existing angel and financial investors typically provide only fundamental warranties (regarding their ability to enter into the transaction documents), whereas founders also provide operational/management representations. Liability is typically capped. In deals involving state-sponsored entities, breaches of representation and warranties are often additionally sanctioned by contractual penalty. 

Austrian limited liability companies and flexible companies have strict capital maintenance rules that may prohibit them from underwriting liabilities in connection with the capital increase (e.g. under representations and warranties or for cost coverage). Founders and other individuals participating in the transaction may qualify as consumers, in which case consumer laws apply (notably, consumers cannot waive certain statutory rights and claims that would normally be excluded).

Other than the peculiarities set out in the other sections, a share transfer may be registered with the Bulgarian Commercial Register only if there are no unpaid liabilities for remuneration or social or health contributions in respect of the company's employees for the preceding three years (to this end, a declaration is signed by the company's managing director and the transferor of the shares).

Prospectus requirements: If the equity financing involves a public offering (in case the start-up is organised as a joint-stock company), a prospectus must be prepared and approved by the Croatian Financial Services Supervisory Agency (HANFA).

Capital gains tax: Investors may be subject to capital gains tax on the sale of shares. The rate and applicability depend on the holding period and the investor's tax residency.

Withholding tax: Dividends paid to foreign investors may be subject to withholding tax, which can be reduced or eliminated under applicable double tax treaties.

HANFA notification: Depending on the nature of the financing, notifications to HANFA may be required.

Czech limited liability companies have strict capital maintenance rules that may prohibit them from underwriting liabilities in connection with the capital increase (e.g. under representations and warranties or for cost coverage). Founders and other individuals participating in the transaction may qualify as consumers, in which case consumer laws apply (notably, consumers cannot waive certain statutory rights and claims that would normally be excluded).

Some of the legal concepts used in VC transactions are borrowed from the common law system. Thus, some of the constructions cannot be easily reflected in the articles of association and should be only kept in the investment and shareholders' agreement, e.g. share classes for LLCs.

Other than the peculiarities set out in the other sections it should be noted that different formalities apply when implementing a capital increase by current shareholders (former investors) or new shareholders (new investors) as regards the registration with the Trade Registry.

Due to the strict capital maintenance rules, any investments made as equity financing may only be recouped by way of dividends and/or loan interest and repayment of the loan. It should be noted that Romanian companies are allowed to distribute dividends on a quarterly basis and not only annually.

A large part of the investment documentation will typically need to be in the form of a notarial deed, which in many cases requires the Slovenian language to prevail (of note to foreign investors) and may increase the transactions costs in a deal.

See also sections (4.5) "Which representations and warranties are typically provided to investors and who is responsible for giving them?" above and (4.8) "What legal peculiarities do shareholders of a start-up need to consider?" below.

Liquidation proceeds (typically structured as 1x, non-participating, i.e. the investor has a right to recover their investment before the other shareholders participate in the liquidation proceeds; if sufficient liquidation proceeds exist, all shareholders would receive pro-rata proceeds), information rights, pre-emptive rights, the right to veto a drag-along (i.e. the drag-along right would still require a majority, including the votes of the investor), tag-along right, anti-dilution right (typically calculated based on the weighted average; such rights are typically requested only in post-seed investments), subscription rights, and non-compete / non-solicitation for founders. Registration rights are granted and requested only in larger financing rounds.

Liquidation preference (typically structured as 1x, non-participating, i.e. the investor has a right to recover their investment before the other shareholders participate in the liquidation proceeds; if sufficient liquidation proceeds exist, all shareholders would receive pro-rata proceeds), information rights, pre-emption rights, drag-along right, tag-along right, anti-dilution right, and non-compete / non-solicitation for founders. Certain investors also require veto / approval rights over major business decisions.

Liquidation preference (allowing investors to recover their investment before other shareholders in case of liquidation, merger or sale of more than 50 % of shareholdings or 50 % of a start-up's asset value), information rights, pre-emptive rights, veto right, tag-along right, anti-dilution right, and non-compete / non-solicitation for founders.

Liquidation proceeds (the articles of association may stipulate, e.g. that the investor has a right to recover their investment before the other shareholders participate in the liquidation proceeds; if sufficient liquidation proceeds exist, all shareholders would receive pro-rata proceeds), information rights, pre-emptive rights, tag-along right, anti-dilution right and subscription rights, and non-compete / non-solicitation for founders.

Liquidation proceeds preference (typically structured as 1x or 1x plus some annual hurdle rate, non-participating, i.e. the investor has a right to recover either its investment plus hurdle rate before the other shareholders participate in the liquidation proceeds or its share in the proceeds on pro-rata basis); pre-emptive rights, drag-along right (i.e. the drag-along right would still require a majority, including the votes of the investor), tag-along right, anti-dilution right (typically calculated based on the weighted average; such rights are typically requested only in post-seed investments), subscription rights, lock-up on the founders, non-compete / non-solicitation for founders and some reverse-vesting/clawback mechanisms applicable to the founders, where they lose part of their shares in case of bad leaver events.

Venture capital investors are also typically granted so-called reserved matters approval, where they are entitled to approve certain operations and actions of the start-up. They also obtain a personal right to appoint and dismiss a member of the supervisory board.

Liquidation proceeds typically may be implemented by means of the established contribution to benefits and losses (i.e. when concluding the shareholder agreement investors, as minority shareholders, may negotiate (i) to have the profit participation higher than the loss participation, provided the difference is reasonable under the circumstances and is expressly provided in the agreement or (ii) to not have the profit and loss participation decrease under a certain percentage of the total value irrespective of its actual shareholding).

Minority rights may also include information rights, pre-emptive rights, the right to veto a drag-along (i.e. in LLCs share transfers require the vote of a majority of shareholders holding three-quarters of the share capital, which may include the vote of the investor if they hold at least 25 % of the share capital), and tag-along rights. Anti-dilution rights may only be enforced if expressly provided in the shareholders' agreement, based on a contractual obligation or in the articles of association. Non-compete and non-solicitation for founders may also be provided in the shareholders' agreement and enforced contractually.

Additionally, in 2015 Romania adopted law no. 120/2015 on stimulating individual business angels, which aims to grant certain tax benefits for individual angel investors, such as exempting them from dividend income tax for three years from the acquisition of shares in the LLC. However, certain conditions must be met to benefit from such tax incentives. 

Liquidation preference (typically structured as 1x, non-participating, i.e. the investor has a right to recover their investment before the other shareholders participate in the liquidation proceeds; if sufficient liquidation proceeds exist, all shareholders would receive pro-rata proceeds), information rights, pre-emption rights, flip-over right, tag-along right, anti-dilution right, and non-compete / non-solicitation for founders. Certain investors also require veto / approval rights over major business decisions.

EKEG: Loans granted by shareholders with a participation in the share capital of at least 25 % or a controlling influence (e.g. through voting rights) to start-ups that are in financial distress may fall within the scope of the Austrian Equity Compensation Law (EKEG). The applicability of the EKEG would prohibit any repayments of the loan during such a crisis.

Capital maintenance rules: Austrian LLCs and FlexCos are subject to strict capital maintenance rules that limit payments of the LLC and the FlexCo to its shareholders to dividends and arm's length transactions (consequences of a violation: transactions are null and void, at least partly; claw-back risk; liability of management; tax liabilities).

Compliance with grant conditions: Start-ups are sometimes provided with grants from public institutions, such as the Austrian federal promotional bank (aws) and the Austrian Research Promotion Agency. Grant schemes commonly impose strict conditions throughout the funding period and sometimes afterwards.

These can include minimum requirements for subsequent financings, such as prohibited repayment.

Unclear qualification: Depending on the structure, it may be difficult to clearly qualify the participation right or silent partnership for tax and accounting purposes. This uncertainty may lead to tax risks and accounting errors.

For more information, see here.

Capital maintenance rules: LLCs are subject to capital maintenance rules that limit payments of the LLC to its shareholders to dividends and arm's length transactions (consequences of a violation: liability of management and tax liabilities).

Compliance with grant conditions: Start-ups are sometimes provided with grants from public institutions. Grant schemes commonly impose strict conditions throughout the funding period and sometimes afterwards. These can include minimum requirements for subsequent financings, such as prohibited repayment.

Lack of regulations: Some of the legal constructions used in VC transactions are not regulated under Bulgarian law. Thus, the investment and shareholders' agreement should be carefully drafted and negotiated to reflect the parties' will.

Given the stricter legal rules applicable to transfers of shares in an LLC, it may prove difficult to enforce various options (e.g. call options, drag-along options).

Shareholders also acting as members of the management board do not need to be employed with a start-up; however, they still need to have pension and health insurance. If they do not have it on another basis (e.g. employment with another employer) they will need to enter into employment or pay insurance by themselves.

Company name: Must be in Croatian or another official EU language, written in Latin letters and/or Arabic numerals. The company name may include foreign words if they comprise a trademark registered in Croatia or if they are usual in the Croatian language, there is no corresponding Croatian word, or they concern a "dead" language (e.g. Latin, Ancient Greek).

Stamp: Croatian companies are still obliged to use a stamp.

Capital maintenance rules: LLCs are subject to strict capital maintenance rules that essentially limit payments of the LLC to its shareholders to dividends (i.e. profit above share capital) and arm's length transactions (consequences of a violation: transactions are null and void, at least partly; claw-back risk; liability of management; tax liabilities).

Capital maintenance rules: Czech LLCs are subject to capital maintenance rules that limit payments of the LLC to its shareholders to dividends and arm's length transactions (consequences of a violation: transactions are null and void, at least partly; claw-back risk; liability of management; tax liabilities).

Unclear qualification: Depending on the structure, it may be difficult to clearly qualify the participation right or silent partnership for tax and accounting purposes. This uncertainty may lead to tax risks and accounting errors.

Compliance with grant conditions: Start-ups are sometimes provided with grants from public institutions. Grant schemes commonly impose strict conditions throughout the funding period and sometimes afterwards. These can include minimum requirements for subsequent financings, such as prohibited repayment.

Unclear qualification: Depending on the structure, it may be difficult to clearly qualify the employee participation programmes for tax and accounting purposes. This uncertainty may lead to tax risks and accounting errors.

Lack of regulations: Some of the legal constructions used in VC transactions are not regulated under Polish law. Thus, the investment and shareholders' agreement should be carefully drafted and negotiated to reflect the parties' will.

Capital maintenance rules: Investors can recoup their equity funding through quarterly or annual dividends, arm's length interest rates and reimbursements. Arm's length intergroup transactions may also be considered (consequences of a violation: transactions are null and void; liability of management; tax liability).

If start-ups apply for national and/or European funds/grants, the strict regulations governing such programmes must be observed (e.g. the programme for stimulating the establishment of SMEs "Start-up Nation Romania"). Such programmes usually include certain requirements to be met before and after financing and may also include minimum requirements for subsequent financing.

Tax implications must always be considered. For example, when incorporating the company, there are certain benefits granted for a new LLC, such as the possibility to pay a tax of 1 % or 3 % on the income instead of 16 % on the profit; however, there are important limitations to be considered as well.

Given the stricter legal rules applicable to transfers of shares in an LLC, enforcement of various options (e.g. call options, drag-along options) may prove cumbersome.

Equitable subordination: See section 1.3 "Are shareholder loans generally admissible? What legal peculiarities need to be considered when providing a shareholder loan?" above.

Capital maintenance rules: Slovenian LLCs are not permitted to transfer value up-stream or side-stream (i.e. to its direct or indirect shareholders) in a manner depriving the sum of LLC's registered capital and restricted reserves (osnovni kapital in vezane rezerve). Payments exceeding this limit may qualify as covert profit distribution (prikrito izplačilo dobička) and may be deemed null and/or void, result in management liability and tax liabilities and/or entail a claw-back risk.

Compliance with (public) grant conditions: Start-ups are sometimes provided with grants or investments from state-sponsored institutions, in particular the Slovene Enterprise Fund and SID Bank. Grant and investment schemes commonly impose strict conditions throughout the funding period and sometimes afterwards.

Limitations on serial company formation and certain founders: To combat creditor fraud and tax abuse, the Slovenian Companies Act (Zakon o gospodarskih družbah; ZGD-1) limits certain persons from acting as shareholders or founders of companies. Such persons include those with a history of tax abuses and white-collar criminal convictions, but also former shareholders of an LLC deleted from the court and commercial register without liquidation. Additionally, the list also includes persons who, within three months prior to the newly attempted company formation, either (i) founded a different LLC or (ii) acquired a share in an LLC that has existed for less than three months.

Direct shareholders of both an LLC and a FlexCo are registered with the Austrian Commercial Register (Firmenbuch) with their name and address and their participation in the company. Except for the articles of association and the capital increase documentation, no transaction documentation should become publicly available.

Shareholders holding Company Value Shares (CVS) are not directly registered in the Commercial Register. However, a list of their names, including surnames and dates of birth, must be submitted to the Commercial Register. This list is available to the public. The only information that is not publicly available is the amount of the respective participation in the company of the shareholder holding CVS.

Direct shareholders of an LLC are registered with the Bulgarian Commercial Register with their name and country of residence/incorporation and their participation in the company. Except for the articles of association and the capital increase documentation, no transaction documentation should become publicly available.

Direct shareholders of an LLC are registered with the Court Register (sudski registar) with their (company) name, address and personal identification number issued by the Tax Authority. Their participation in a company is not published, but it may be accessed at the Court Register upon request. Except for the articles of association and the capital increase documentation, no financing documentation should become publicly available.

Direct shareholders of an LLC are registered in the Czech Commercial Register (obchodní rejstřík) with their name and address and their participation in the company. Except for the articles of association and the capital increase documentation, no transaction documentation should become publicly available.

Direct shareholders having more than 10 % in the share capital of an LLC are disclosed in an online excerpt from the Polish Commercial Register (Krajowy Rejestr Sądowy) with their name and indication of their participation in the company. The full list of shareholders is also available to everyone at the registered office of an applicable court (applies to changes notified before 1 July 2021) or online (applies to changes notified from 1 July 2021).

Shareholders of joint-stock companies and PSAs are not disclosed in the Polish Commercial Register (Krajowy Rejestr Sądowy) (subject to a sole shareholder of a joint-stock company); however, they can be disclosed in the Polish UBO registry (Centralny Rejestr Beneficjentów Rzeczywistych) if they are beneficial owners of such a company.

Except for the articles of association and the capital increase documentation, no transaction documentation should become publicly available.

Shareholders in an LLC must be registered with the Romanian Trade Registry and such information is part of public records. Except for the articles of association and the capital increase documentation (corporate resolutions), no transaction documentation needs to become publicly available.

Direct shareholders of an LLC are registered with the Slovenian court and commercial registers (sodni register in poslovni register) with their name and address and their participation in the company. Except for the articles of association and the (typically short-form) capital increase and/or share transfer documentation, no transaction documentation should become publicly available.

Pre-emptive right, drag-along right, tag-along right and, to a minor extent (i.e. in later stages only), registration rights. Founders are typically subject to a lock-up. 1-2x liquidation preferences (non-participating) are common.

Pre-emptive right, drag-along right, tag-along right. Founders are typically subject to a lock-up. 1-2x liquidation preferences (non-participating) are common.

Pre-emptive right, drag-along right, tag-along right.

Pre-emptive right, drag-along right, tag-along right. Founders are typically subject to a lock-up. Liquidation preferences may be linked to the occurrence of an exit event.

Pre-emptive right, right of first refusal/right of first offer, drag-along right, tag-along right. Founders are typically subject to a lock-up. 1-2x liquidation preferences (non-participating) are common.

Pre-emptive rights, call option, liquidation preference, drag-along or tag-along rights. Founders are typically also subject to a lock-up period.

Pre-emption right, drag-along right, tag-along right. Founders are typically subject to a lock-up. 1x liquidation preferences (non-participating) are common.

Exits are typically structured either as a share deal (sale of all shares in the start-up) or asset deal (sale of all assets of the start-up). Mergers and IPOs are rare.

Exits are typically structured either as a share deal (sale of all shares in the start-up) or asset deal (sale of all assets of the start-up). Mergers and IPOs are rare.

Asset deal (sale of all or a main part of the assets of the start-up) or a share deal (sale of all shares in the start-up).

Exits are typically structured either as a share deal (sale of all shares in the start-up) or asset deal (sale of all assets of the start-up). Mergers and IPOs are rare.

Exits are typically structured either as a share deal (sale of all or majority of shares in the start-up) or asset deal (sale of all assets of the start-up). Mergers management buyouts and IPOs are rare.

Exits are typically structured either as a share deal (sale of shares to the other shareholders or to a third party) or asset deal (sale of all the company's assets). Mergers and IPOs are rare.

Exits are typically structured either as a share deal (sale of all shares in the start-up) or, less commonly, asset deal (sale of all assets of the start-up). Mergers and IPOs are rare.

Relocation of the main entity to a different jurisdiction pre-exit is not unheard of.

This depends on the type of corporate form.

LLC: Any agreements governing the transfer of shares in an LLC, as well as any agreements on the envisaged transfer of shares (e.g. call options / put options), need to be recorded in the form of an Austrian notarial deed (Notariatsakt).

FlexCo: Any agreements governing the transfer of shares in a FlexCo, as well as any agreements on the envisaged transfer of shares (e.g. call options / put options), require a private deed executed by either an attorney or a notary, provided the legality of the transaction is verified and the parties are advised of the legal consequences.

Any agreements governing the transfer of shares in an LLC or transfer of the business as a going concern must be executed with (i) notarised signatures of both the transferor and the transferee, and (ii) notary certified content. To be effective vis-à-vis third parties, the transfer agreement, along with other documents, must be registered with the Bulgarian Commercial Register.

The form of an asset deal depends on the subject of the transfer (e.g. IP, real estate).

Share transfer agreements need to be in the form of a notarial deed (javnobilježnički akt) or certificated private deed (solemnizacija). The form of an asset deal depends on the subject of transfer (e.g. IP, real estate).

If the share transfer agreement (STA) is not being signed at the same time as the share purchase agreement (SPA) is being signed, then the content of the share purchase agreement also has to be certified (solemniziran).

Any agreements governing the transfer of shares in an LLC must include notarised signatures of both the transferor and the transferee. In practice, this rule is also observed in relation to call and put options.

Any agreements governing the transfer of shares in an LLC need to be executed with the signatures certified by a notary public. The capital increase documentation and the shares subscription statements need to be in the form of a Polish notarial deed. For more comprehensive description, please see point 4.3 above.

The agreements governing the transfer of shares in an LLC do not require any formalities other than the parties' signatures and execution of the relevant corporate approvals. However, for a share transfer to be enforceable against third parties (Romanian IRS, company creditors, etc.), the transaction must be registered with the Trade Registry Office. Also, one should consider registering the share transfer with the LLC's shareholders register, which must be kept by the LLC's directors.

Unless provided otherwise by the LLC's articles of association, the transfer of shares to a third party needs to be voted by the LLC's shareholders holding at least 3/4 of the entire share capital.

Any agreements governing the transfer of shares in an LLC, as well as any agreements on the envisaged transfer of shares (e.g. call options / put options), need to be recorded in the form of a Slovenian notarial deed (notarski zapis). Structures employing a long-form share purchase agreements in a non-notarial form (containing most of the commercial deal terms) with a notarial deed short-form transfer document (used for registration formalities) have also been used on the market in the past years.

Registration in the Slovenian court and commercial register (sodni register in poslovni register) is required to achieve the full effects of the transfer of share in an LLC. This is typically done as a matter of course by the notary involved with the transfer documentation.