Mar 11, 2022
Jurisdiction and VC Tools in Central Asia
AIFC is an international center for business and finance in Central Asia that aims at attracting investment opportunities to the regional startup ecosystem and fostering the VC market of Central Asia.
The jurisdiction of AIFC is based on the transparent and comprehensive English Common Law that complies with global standards and the world’s best jurisdictional practices and offers great opportunities to business undertakings, some of which are not provided by any other institution of the CIS region.
The AIFC Court is independent and flexible in disputes’ resolutions.
The tax system of AIFC is beneficial for all AIFC participants, making those with regulated and authorized market activities exempt from corporate income tax (CIT), value-added tax on income (VAT) for assets from AIFC-based investment funds, and much more.
On top of that, AIFC enables the structuring of multiple VC agreements that facilitate the startups’ operation and the process of making successful investment deal flows – from convertible loans and SAFE, to KISS, SPA, private placement, and more.
Being firstly introduced in Kazakhstan (by AIFC) among all members of CIS, a convertible note is a form of short-term debt provided by investors.
In its simplest sense, this is money an investor lends to a startup as a part of a pre-seed or seed investment round. The company can either return the loan with interest or provide the investor with a share in accordance with the number of investments later.
(Simple Agreement for Future Equity)
Like a convertible note, SAFE involves the conversion of funds invested by an investor into shares, usually when a startup raises capital in pre-seed and seed rounds. This agreement is formally classified as a debt instrument, although it does not imply the accrual of interest and the return of money to the investor if the startup was unable to raise a new round.
KISS (Keep It Simple Security)
Like SAFE, this note allows startups to obtain capital eliminating the long and expansive stage of negotiations. There are two types of KISS:
Debt KISS: with a standard interest rate (5%) and a maturity date (18 months) upon which an investor can convert the investment (+ an interest) into a share.
Equity KISS: without a standard interest or a maturity date.
Private companies can issue shares of different classes and types through a private placement.
A private placement is a sale of securities to a pre-selected number of individuals and institutions which enables obtaining the money a startup needs to grow while delaying or foregoing an IPO.
Stock Purchase Agreement (SPA)
In the Series A round, an investor receives shares in a startup in exchange for the invested money.
The main agreement for structuring this deal is the Stock Purchase Agreement (SPA) which, contrary to the Term Sheet that lays out the main conditions of the transaction, contains special conditions associated with the sale of a company’s shares.
On the VentureRocket Eurasia platform, we enable co-investing in vetted startups in a fully regulated environment governed by the AIFC jurisdiction. All startups joining the platform must register through the AIFC platform, this way getting access to all the needed investment tools/agreements, offered by AIFC.
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