„Marriage contract“ for partners: the investment agreement and the agreement of the shareholders govern the cohabitation of founders and investors. The social contract of gmbH is also called statutes. This term is more precise, because although only a partner can create a limited liability company (Ein-Mann-GmbH), the law in 2 GmbHG refers to a „contract“. And a contract is an agreement between at least two parties. A participation contract is the generic term for all agreements related to an investor`s participation in the company. Often, only the investor`s entry requirements are governed by a participation contract, i.e., in particular, the amount of the participation and its valuation. The contractors of the participation agreement are not only the partners, i.e. the former partners and the investor as new partners (unlike the association agreements), but also the company in question. Cohabitation between investors and former partners is often re-settled in a separate partner agreement, but this is not mandatory. As is often the case, it is not how a treaty is called that counts, but what it says. The concept of preferring to liquidation applies not only to the liquidation of the company, but also to the sale of businesses and is partly extended to the IPO of the company.
In essence, the agreement of a liquidation preference means that the investor, before the other shareholders receive their product, recovers his investment. The agreement on a liquidation preference is therefore intended to guarantee the valuation paid by the investor. Venture capitalists regularly take only minority stakes and do not assume operational management roles. Nevertheless, investors generally want certain participation rights in order to influence the development of the business. The rules are typical at two different levels: on the one hand, it is agreed, at the decision-making of the general meeting of shareholders, of a certain number of majority requirements or a separate reserve of approval of the investor.