Russian start-UPS in recent years, increasingly attract investment and open to foreign markets, attracting financing from there. In such a situation inevitable disputes between investors and founders of the project, said a practicing lawyer and specialist in M&A, international private law and arbitration Irina Tsvetkova. She has written for vc.ru a column about how a startup should do, if he threatened litigation with the investor or if the trial has already begun, as well as how to find appropriate lawyer in Russia or abroad. Just for the 2012-2014 years, the number of direct investments, according to the Foundation for Internet development initiatives (Fria), rose to 81.5%, because of high activity of venture capital funds.
Not all survive. Service for lending companies Fleximize found that in the first year killed more than 17% of start-UPS, and in the first five years — about half. This gives rise to disputes between investors and startups. However, neither one nor the other do not like to talk about the fact that the project “is not soared” and then “divorce” through the courts. Therefore, even in the professional community about these matters, little is known.
In foreign markets one of the recent odious processes — Partner Fund Management lawsuit filed in the fall of 2016. Against Theranos. Hedge Fund of San Francisco accused the founder of the project Elizabeth Holmes in the intentional deception of investors and demanded return of invested funds and damages. And this is not the first claim to Theranos in may 2016 the company had put forward a class action lawsuit from a group of investors.
In Russia established court practice on disputes between startups and their investors no, says the publisher of the project Firrma Dmitry Falaleev. And if such disputes arise, it is, according to him, is due to the neglect of the last registration of the legal relationship at the start. The lawyer of a major international venture capital Fund connects disputes with the control and management of startups.
For example, when the founder wants to withdraw from the project contrary stated in the contract or fixed on the words of the agreement. Or one of the members of the company insists on making their important decisions, but cant do it because of the capital structure (if each of the partners, 50% of the votes and the second partner or the investor does not agree with the decision). Finally, if one of the participants, leaving, takes with a client base to build your own project. The base may be the most valuable for a startups intellectual asset, says my interlocutor.
There are such situations when the founders of a startup have to sue their investors. For example, if an investor wants to sell the intellectual property at a lower price. Or wants when you exit project to more than was originally agreed. Or, for example, openly prevent the occurrence of the second investor.
Remember the examples of legal disputes startups with investors. As soon as the Russian start-UPS are increasingly looking at foreign markets, they begin to form judicial practice in foreign jurisdictions. A recent example. In early January it became known that the managing partner of Starta Capital Fund and head of Qiwi Sergey Solonin, and several business angels are suing the Russian startup iBuildApp and its CEO Rafael Sultanov.
That lawsuit was filed in the court of the city of San MATEO (CA), with reference to Sultanov announced the publication of Firrma. The courts between startups and investors occur, and their number will grow. For a start, to hire a lawyer. Of course, you can try your hand yourself and be accepted for the making of objections, legal using constructors (for example, FreshDoc). You can also contact to the service operational legal advice (for example, Pravoved.ru).
But as practice shows, online consultation only good for specific or generic issues (consumer protection, the division of property of spouses, on appeal against decisions of traffic police and so on). In the event of a dispute with the investor should understand that hes probably already hired a professional lawyers (or, at least, has its own staff of lawyers), and they have studied the terms of your agreement and its violations, have made the claim and collected the documents as evidence in the case. The dispute turns into a procedural plane and online advice, Im afraid there is not enough. Do not try to immediately determine the choice and sign the contract on representation of interests in court. To start met with several lawyers in the end, a personal impression in this case is also very important.
Ask candidates to pre-assess the prospects of the case and to figure out how much it can cost legal support. It is essential that candidates have presented the recent court practice and the clear and logical explanation of his insights. You can even show this conclusion to other lawyers that they, in turn, appreciated his quality. It will be cheaper than hiring an incompetent specialist and this “burn”. Here we come to a very important point – the question of payment.
Components of the cost of the judicial protection of many, but on average a lawyer for this type of cases are from 5% of the amount of the claim. That is, if, for example, an investor wants a court to withdraw from the project, demanding to pay him 2 million rubles, then the startup will pay his attorney a minimum of 100 thousand rubles. If the court comes to the US, where was a Russian start-UPS (such as iBuildApp, was in California), the cost of the proceedings grows significantly. Only one fee for filing a claim costs some States $250-300.
And the lawyers usually work on an hourly, on average — $400 per hour. Or 30% of the size of the debt, if the trial promises to be brief. Co-founder GetIntent Vladimir Klimontovich describes the mechanics of debt collection in the USA. “The parties attempt to reach an amicable agreement. You simply negotiate with the debtor (via their lawyers), about how to market.
On any objective indicators of bargaining is not based. If you agree, your lawyer will take 30% of this amount. With the latest debtor we agreed on 75% of the debt, of which 30% took the lawyer. So weve got about 50%”. The problem is that wherever you are sued, lawyers usually require payment for their services forward.
In England, for example, you Deposit $5 to 15 thousand (depending on the dispute), and only then your lawyer will be accepted for the study of the case, systematically writing off on average from $250 to $750 per hour (including Skype conversations, meetings, study and upload documents and so on). Russia qualified lawyers with no down payment is also, alas, usually do not work. If there is nothing to pay – Fund the trial. A few years ago began to appear, investment funds and organizations that make the investment in trials. In other words, if they think the game is worth the candle, they Finance the litigation, in order to subsequently obtain a fixed part of the amount won.
Abroad, the company this format began to appear at the end of 2000-ies — for example, IMF Bentham. In Russia until recently there were no companies that would have invested in the trials and thereby equalized the possibility of wealthy plaintiffs (in our case investors) and respondents (in our case start-UPS). Now this niche is occupied by the Platforma project — it allows you to find an investor who will invest in litigation in exchange for compensation as a result of its successful completion. There you can find a lawyer who is willing to work under the “no win no fee”. In other words, if the investor has filed a lawsuit against startups (or Vice versa), and money for litigation is not, on Platforma, you can apply for find a lawyer.
This process is done manually. Platforma as a party directly interested in the successful outcome of the case, helps to find a lawyer, highly competitive it is for your category of cases. And since it is the brainchild of professional lawyers, for them this selection – the question is much more simple than for a person from the street, startups, who sued the investor. The fee a lawyer will only receive in case of victory and seized amounts. Therefore, this service promotes the idea of success fee that applies abroad and yet only developing in Russia.
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