The WilmerMatrix

Author: | Published: 4 Jan 2001
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As US venture capital funds flow into Europe and as historically country-specific European venture capital funds implement pan-European investment strategies, they bring with them certain expectations and practices in investing in early-stage and emerging-growth companies. Venture capitalists (VCs) are accustomed to doing deals with ease and speed under a familiar legal regime. When some of the Americans arrive in Europe, or as certain funds execute European-wide expansion plans, some simply take their tried-and-true venture capital term sheets and cut-and-paste certain phrases. However, the diversity of the European legal and cultural systems does not always allow for such a standard, unified approach. In certain European jurisdictions, basic venture capital terms are not recognized as legal corporate concepts. However, in many cases, work-around solutions are possible if the VC is willing to make certain compromises (which are often not commercially significant). In many cases, contractual solutions – as certain protections and provisions are incorporated into a shareholders' agreement between the VC and the founders/shareholders of a start-up – can be achieved. Thus, the VC could arrive at a position to deal comfortably with the "quirks" of certain European jurisdictions, including: two-tier board structures; limitations on preferential voting rights; and restrictions on the ability of a company to redeem shares.

We have developed the WilmerMatrix to help ease some of the aggravation of doing venture capital deals in Europe. A basic familiarity with the applicable laws of the European jurisdiction in which a VC is contemplating an investment usually saves the VC, the start-up and the legal advisers time, money and frustration. The WilmerMatrix takes significant terms in most venture capital term sheets and describes the issues raised, if any, in seven European jurisdictions. The WilmerMatrix does not purport to be comprehensive or to provide ready-made solutions. Its main purpose is to serve as an orientation guide to the not-so-unified Europe for the VCs (whether American, European or anyone else more accustomed to doing deals in a particular country) and the start-ups seeking their funds. For an expanded version of the WilmerMatrix (including a description of the restrictive nature of limited liability companies in European jurisdictions), please visit  or

 Issue  US  Belgium  France  Germany  Italy  Netherlands  Spain  UK
 Entity  Stock Corporation (under the General Corporation Law of the State of Delaware)  Société Anonyme SA (Stock Corporation)  Société Anonyme SA (Public and Private Corporation)  Aktiengesellschaft AG (Stock Corporation)  Societá per Azioni SpA (Stock Corporation)  Naamloze vennootschap NV (Public limited liability company)  Sociedad Anónima SA (Stock Corporation)  Private Limited Company Ltd (Limited Liability Company)
 Preferred voting shares; different classes of stock allowed with different voting rights?  The company has wide latitude in assigning varying voting rights to different classes of stock in its organizational documents, whether common or preferred. Preferred stock can have voting rights more limited or more expansive than common stock. Often, holders of preferred stock are permitted to vote both their preferred stock and the common shares into which their preferred stock are convertible. Voting agreements are also common.  Preferred voting shares are not possible. Each share confers one vote at the general meeting of shareholders. It is possible to issue non-voting shares with special advantages under certain conditions. It is also possible to issue non-equity shares (parts bénéficiaires), the rights of which are determined by the organizational documents.

Different classes of stock are possible in an SA; certain decisions can require a majority vote of each class.

Organizational documents may limit the number of votes which each shareholder holds in the general meeting, provided such limitation applies to each shareholder.

 Usually each share has one vote. Classes of common, preferred and non-voting shares may be created. Rights within each class must be equal unless changed by a supermajority vote. Non-voting shares receive special dividend rights.  Each share has one vote. Voting shares with different economic rights can be created (e.g, liquidation preference) but different voting rights are not possible. In addition, preferential but non-voting shares can be created.  Not possible. Shares may not carry multiple votes.

Organizational documents may limit the voting rights of preferred dividend shares; limited voting shares may be issued for an amount up to half of the share capital.

 Unless the organizational documents provide otherwise, all shareholders have equal rights in proportion to the nominal value of their shares. Provisions in the organizational documents concerning voting rights may limit, but not completely eliminate, these rights. Presently, non-voting rights do not exist.

In addition, the organizational documents can provide for priority shares (prioriteitsaandelen) which give their holders certain powers, including:

  • the right to make binding nominations regarding the appointment, suspension and dismissal of board members;
  • the right to veto the issuance of new shares;
  • the right to create reserves out of annual profits; and
  • the right to veto proposed amendments to the organizational documents.
 Not possible.  Different classes of shares with varying rights are possible.

Preference shares are usually non-convertible with a cumulative dividend. They are usually redeemable within a certain time frame.

Preference ordinary shares usually carry preferential investor terms and are convertible on a listing or sale into standard ordinary shares – there is wide flexibility for a company to issue shares on a variety of terms.

Rights set out in organizational documents should also be incorporated in the shareholders' agreement.

 Convertible Shares (Preferred to Common)  Preferred stock can be designated as convertible into common stock at the option of the holder or upon the occurrence of specified external events.  Possible.  Possible.  Possible, subject to shareholders' approval rights.  No express prohibition against convertible shares; available types of different classes of shares are limited.  Possible.  Possible.  Possible.
 Cumulative Dividends  The company's organizational documents can specify that dividends on a particular class of stock, common or preferred, be cumulative.  Possible.  Possible.  Preferred dividends are cumulative. Voting shares with preferential economic rights receive no cumulative dividends.  Not possible, because a dividend does not exist until the shareholders meeting declares it payable, based on current income and earnings set aside from previous years. Cumulative dividend result can be achieved using debt.  Possible.  Cumulative dividends are not possible. However, it is possible to establish a minimum dividend in the organizational documents.  Ordinary or preference shares may include a right to cumulative dividends, but this would be more usual in the case of preference shares.
 Preferred Dividends  It is possible, and in fact common, to issue classes of stock or interests having a preference over common stock in the payment of dividends.  Possible; however, the Civil Code prohibits the allocation of all the profits or losses to certain shareholders.  Possible.  Possible; usually in combination with non-voting shares but also possible for voting shares.  Possible.  It is possible to issue shares which have a preference over ordinary shares in the payment of dividends up to and limited to a percentage of their nominal value as stated in the organizational documents.  Possible.  Possible.
 Redemption of Shares  Delaware law generally prevents companies from borrowing money to effectuate a redemption. Stock of a private company must be redeemed in compliance with rights and restrictions outlined in applicable shareholder agreements. Redemption rights can exist at the option of the holder or the company, or they can be triggered by external events such as a liquidation, a change in control or a financing event.  With limited exceptions, a SA may acquire its own shares by shareholder resolution (adopted with a quorum of 50% of the capital and majority of 80% of the capital).

Value of shares acquired may not exceed 10% of the share capital and accumulated profits must be used to redeem shares.

 The buy-back must be authorized by a shareholders' meeting.
  • Public SA: may only buy back 10% of its shares. (Shares must be registered.)
  • Private SA: May buy back its shares under certain conditions.
 There are limited circumstances when a company can buy back its shares, and then only up to 10% of share capital.  Possible, but heavily restricted, due to the registered capital minimum requirement. Company may only buy back up to 10% of its share capital after shareholders meeting approval and within the availability of retained earnings.  An NV may repurchase (inkoop) shares provided that those shares have been paid in full. The price for the repurchased shares must be paid out of distributable reserves. The NV, together with its subsidiaries, can own only 10% of its own shares.  SA may issue "acciones rescatables" (shares that can be redeemed by the company). The amount is limited to 25% of the equity. Otherwise, company may only buy back 10% of its share capital, or 5% in the case of a listed company.  Possible, but limited circumstances where company can buy back its shares using capital. Requires 75% shareholder resolution.
 Stock Options  The company can issue options which allow the holder, during a specified period of time, to purchase the company's stock at a specified price. Options are often issued as part of an employee compensation plan.  Possible, with a 10% or 20% limit of share capital. A SA may issue subscription rights in favor of the beneficiaries.  Possible. Public SA: option price is tied to price of shares. Lock up period should consider tax position.  Possible. In order to enable the company to issue (new) shares when stock options are exercised, the company creates as "back-up" either conditional capital (bedingtes Kapital) or authorized capital (genehmigtes Kapital); 75% shareholder approval required.  Possible. Possible.




 Possible whether pursuant to employee share plans or otherwise.
 Appointment of Directors  Directors are elected for a specified term by vote of the company's shareholders, in the manner outlined in the company's organizational documents. The company's organizational documents may permit the shareholders to remove a director with or without cause. Shareholders can vote all as one class or as separate classes and series of stock. Often, the holders of a particular class or series of stock (usually preferred) are permitted to elect a specified number of directors to represent the interests of that class or series on the board.  Board members are appointed by the general meeting of shareholders. A SA may have proportional representation (directors may be appointed from a list of candidates presented by the different classes of stock respectively) as long as there is the possibility of effective choice by the general meeting of shareholders, i.e. sufficient excess of candidates over vacancies.

Directors may be removed at any time by the shareholders' meeting without cause.

Organizational documents may not require a special majority for removal of directors.

 SAs may be managed by a one or two tier system.
  • One Tier System: Board of directors are appointed by shareholders;
  • Two Tier System: Supervisory board appointed by shareholders and an executive board whose members are appointed by the Supervisory Board but dismissed by shareholders upon Supervisory Board proposal.
 Shareholders can only appoint board members indirectly through two-tier management board structure:
  • shareholders may only appoint supervisory board (Aufsichtsrat);
  • supervisory board only may appoint board of managing directors (Vorstand);
  • shareholders may not instruct supervisory board members to elect certain managing directors.
 Directors are appointed by shareholder meetings. Shareholders can appoint both internal or external directors.

The board of directors can delegate some of its functions to an executive committee (comitato esecutivo) or to any one of its members (amministratore delegato).

The president and the members of the board of auditors (collegio sindacale) are appointed by shareholders' meeting. The members (sindaci) of the board of auditors can be both internal or external, but must be enrolled in the register of publicly admitted auditors.

 Managing directors are appointed by the general meeting of shareholders. The shareholders may be required to accept nominations made by the management or (if applicable) the supervisory board, by a particular type or class of shareholders or any other person or institution, stated in the organizational documents. These nominations can always be overruled by a qualified majority of two-thirds of the votes cast, representing more than half of the issued shares.  The board of directors is elected by the shareholders' general assembly. In rare cases, the board may appoint shareholders to occupy vacant positions until the next general meeting is held.

The directors may be dismissed without cause, at any time, by a shareholders meeting.

  • Directors can be appointed by board resolution or by 50% shareholder resolution
  • The minimum number of directors will usually be two, but this can be varied by the organizational documents or by 75% resolution of the shareholders.

 Shareholders Approval, Supermajority Voting
- capital increase or decrease

- issuance of new class of shares

- spin-off

- modification of organizational documents

- change of management

 Ordinary business matters are, by virtue of the company's organizational documents, delegated by the shareholders to the Board of Directors and the company's executive officers. However, shareholder approval is still required for extraordinary corporate actions. Therefore, shareholder approval must be obtained for extraordinary corporate actions such as a merger or consolidation, a sale of all or substantially all of the corporate assets (other than in the regular course of business), nonjudicial dissolution, modification of corporate purpose or modification of the company's organizational documents, either to change the company's capital structure or otherwise. Delaware law generally requires that such matters be approved by at least a majority of the company's outstanding shares. Typically, however, a company's organizational documents will require that such matters be approved by a supermajority vote, usually two-thirds or three-quarters of all the outstanding shares.  It is possible to provide for qualified voting majority in the organizational documents or a shareholder agreement (other than for change of management). Some increased majority and/or quorum are required by operation of law:
  • When decided by the general meeting of shareholders, a capital increase or decrease requires a quorum of at least 1/2 the capital and a majority of 3/4 of the votes.
  • Modification of corporate purpose requires quorum of at least 1/2 of the capital and a majority of 4/5 of the votes.
  • Dissolution of the company requires a 75% majority vote (and certain other procedural requirements).
  • Modification of organizational documents requires a quorum of at least 1/2 the capital and a majority of 75% of the votes.
 Shareholders may not limit managerial powers of board.
  • 2/3 supermajority vote required for: alteration of organizational documents; mergers; spin-offs; stock options; conversion.
  • Change of management requires a majority vote.
 No special voting rights for shareholders. For special issues, organizational documents may provide that board of managing directors needs approval of supervisory board, whereby organizational documents may provide for supermajority in supervisory board. Special issues (which directly affect the membership rights of the shareholders) need approval of shareholders meeting.  Supermajority voting can be set forth in the organizational documents for certain decisions taken in extraordinary sessions (assemblea straordinaria).

No supermajority voting can be requested on second call on certain matters left to the ordinary shareholder meeting (assemblea ordinaria).

  • For a resolution to decrease the capital, at least a two-thirds majority is required at that shareholders meeting of an NV if less than one-half of the issued capital is represented at the meeting. No qualified majority required for capital increase.
  • The organizational documents must be amended in order to enable the corporation to issue shares of a new class. No statutory qualified majority required for the issuance of new class of shares.
  • A vote to "split-up" the company is similar to a vote to amend the organizational documents, except that if less than one-half of the issued capital is represented at the shareholders' meeting, a qualified majority of two-thirds of the votes is required. A split-up vote for a "qualified division" can only be taken by a majority of three-fourths of the votes cast in a meeting where at least 95% of the issued capital is represented.
  • Bylaws of the type commonly drawn up in the U.S. are unknown in the Netherlands.
  • The shareholders' meeting normally has the power to appoint, suspend or dismiss managing directors although the organizational documents may require an increased majority and/or quorum.
 It is not possible to limit the managerial powers of the directors with respect to the business purpose of the company. Any modification of the organizational documents requires the prior approval of the shareholder's assembly with a 2/3 super-majority.

It is possible to appoint directors that must take decisions jointly (administradores mancomunados). Spanish law allows:

  • a sole director;
  • joint and several directors;
  • two "administradores mancomunados" for the SA; or
  • a board of directors.

Supermajority vote needed for increase or decrease in capital; alteration of the company form; or merger, splitting of the company.

  • Shareholders' resolutions required for capital increase;
  • Shareholders may vote on capital increases, new classes of shares, dissolution of the company or modification of the organizational documents.
  • Directors can be appointed and removed either by 50% resolution of the shareholders or by board resolution.
 Transferring Shares  Shares of a public company may be listed and are freely transferable. Shares of a private company may not be offered to the public at large and must be transferred in compliance with restrictions imposed by federal and state securities laws and any applicable shareholders agreements.  Shares are freely transferable unless organizational documents provide otherwise.
  • Public SAs: Shares are freely transferable. Restrictions may be placed in shareholders agreement but have to be disclosed to market authorities.
  • Private SAs: Shares are freely transferable. Restrictions may be placed in company's organizational documents or in a shareholders agreement.
 Shares are freely transferable.  Shares are freely transferable. Usually a share in a SpA is transferred by endorsement.  Bearer shares are transferred by surrendering the share certificates. Registered shares are transferred by a deed of transfer executed before a Dutch civil law notary. Unless the NV is a party to the transfer, shareholders' rights can only be exercised by the new shareholder after the corporation has acknowledged the transfer of the registered shares (erkenning), or the notarial deed has been served upon by a Dutch court bailiff (betekening).  Shares are freely transferable.  Shares may not be offered to the public at large. Transfers are governed by the company's organizational documents and any shareholders agreements.
 Restrictions on Transfer; Right of First Refusal and Right of First Offer  Registered shares of a public company are freely transferable. Shares of a private company must be transferred in compliance with restrictions imposed by:
  • federal and state securities laws which may require registration of the securities and/or the shares sought to be transferred; and
  • restrictions provided for in shareholder agreements, such as share retention agreements, rights of first offer or first refusal, tag along rights, and drag along rights.
 Transfers may be restricted through pre-emptive rights (clauses de préemption); including right of first refusal and right of first offer; or requirement of approval of transfer by board of directors, group of shareholders or third parties (clauses d'agrément). Clauses de préemption and clauses d'agrément may last for a maximum of six months from approval request or invitation to exercise preemption rights; corporate prohibitions on transfer (clauses d'inaliénabilité) must be limited in time, and for a definite period.  Transfers may be restricted by organizational documents.  Limited possibility for restrictions at AG level; restrictions through shareholder agreements are enforceable.  Absolute restriction in organizational documents on transfer is void. Requirement of board approval is not always allowed. Restrictions on transfer generally contained in a shareholders agreement.  Restrictions on the transfer of NV shares are optional and must be set forth in the organizational documents. Restrictions can only apply to registered shares. Bearer shares are always freely transferable. Permissible restrictions may include a right of first refusal, an approval system or a limitation that registered shareholders be individuals or entities having certain qualifying characteristics. Restrictions may not render transfer impossible or onerous.  There are no transfer restrictions unless:
  • imposed by the organizational documents, and
  • shares are registered (nominatives).
 Restrictions may be placed in organizational documents or by shareholders agreement. Considerable flexibility exists including pre-emptive rights, rights of first refusal, tag along and drag along rights.