New bill to regulate foreign investments in startups operating in Armenia

In its today's session, Armenia’s Government approved the draft law "On Amendments and Changes to the Law on Joint Stock Companies", the purpose of which is to create legal conditions for attracting investments in companies in Armenia through SAFE contract.

It is expected that the adoption of the draft law will create a simple and clear tool for making foreign investments in companies at the initial stage of development (startup), the legal regulation of which will contribute to the attraction of investments and investors, the clear regulation of relations between companies at the initial stage of development, the stability and predictability of legal relations.

According to the proposed regulation, it is defined that under the SAFE (Simple Agreement for Future Equity - SAFE) contract, the investor undertakes to invest in the company's equity capital of the amount specified by the contract, and the company, upon reaching the conditions specified by the contract, undertakes the responsibility to issue and allocate shares in the future in favor of the other party (the investor) with the the number, type and class of shares to be stipulated in accordance with by that contract.

The parties determine the conditions defined in the contract by mutual agreement based on the principle of freedom of contract. As a rule, such conditions include public offering of shares and/or other securities by the company, investment of a certain amount in the authorized capital of the company by a third party, sale of the company's shares or a certain part of them, etc.