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Interview with Marco Corica, international business lawyer: how to help startups from the start and up to financing rounds.
Let’s meet Marco Corica, International Business Lawyer and Founding Partner at GIM Legal STA
Interview with Marco Corica, International Business Lawyer specialized in Corporate Finance, Founding Partner at GIM Legal STA Srl and CEO at GIM Capital. He assists Venture Capital and Private Equity Funds in M&A transactions with established companies and startups.
Hi Marco, thanks for this interview, let’s start immediately by introducing yourself and telling us about your experience and what led you to found GIM Legal STA and GIM Capital.
GIM Capital is an innovative company that, thanks to an interactive digital platform, offers accounting, tax and payroll and social charges services to SMEs which excel in their reference market and with development projects, even abroad, working alongside as a business partner.
Can you tell us more about its business and its services?
The idea of transforming a renowned firm of Chartered Accountants, which since the ‘70s in Rome has always offered accounting, administrative, tax and payroll and employment contracts management services to many local SMEs, into an accounting and tax outsourcer, in the form of an innovative startup registered in the special register of companies, arises from the intuition of optimizing the response time to customers in order to guarantee them the compliance with all the relevant rules and deadlines. To speed up the performances and, consequently, shorten the distances with the customers themselves in the exchange of documents and information, we make use of innovative technological systems that offer a greater product quality and a better service efficiency.
GIM Legal STA, with offices in Milan, Rome, and London, is a legal and regulatory consulting firm, highly specialized in financial services, capital markets and real estate investments. Can you tell us more about how it operates?
GIM Legal was born from the experience of four founding partners, including myself, experts in the sectors mentioned above, and it uses a business model based on the high quality of the assistance provided to its clients.
GIM Legal is today one of the leading law firms in Italy, thanks to the high specialization of its staff in the areas the firm focuses on, and paying great attention, through investments of resources and time by the members and partners, to training and promoting the development of the skills of the juniors who can improve their specialized knowledge related to institutional entities regulated by the Authorities of the reference markets (e.g., AIF, AIFM, SGR, SIM, Investment Funds, Issuers, etc.).
There is a lot of talk about support to startups in the Legal area and about business lawyers, but what is a Business Lawyer and how can they support startups?
The Business Lawyer is generally understood in Italy as a corporate law professional who mainly deals with national and international contracts, with a broad vision on out-of-court issues.
Personally, I would broaden the definition, or rather the concept, and define this professional figure in a more specialized way, as far as he/she chooses his/her sectors of activity on the basis of the subjects that he/she mainly studies and in which he/she provides his/her assistance, and to do so he/she must constantly intercept the changes of the consulting market on the basis of the continuous evolution of the rules of the market itself, determined by the economic dynamics on a global level.
What are the steps that a startup founder must take to get in touch with an investor and finally sign an investment contract? From the point of view of Business Lawyer, how do you recommend proceeding to be prepared?
I start from a statistic that records a mortality rate of about 80% of startups during the very first years of life. This figure should not discourage, but rather it should make startup founders reflect on the opportunity to face the first steps of the activity – i.e., the market analysis, the development of an idea, its presentation to the public with suitable tools – in a non-improvised way. It should be considered that the preliminary study and analysis phase are essential and take time. After all, haste always makes waste and does not necessarily make young people with potential brilliant ideas successful entrepreneurs. It is therefore necessary to get prepared, have clear ideas, be equipped with a business model and a business plan, possibly with some initial financial resources of your own, which allows the project to be presented with a basis of financial solidity, set up a joint-stock company with an internal organization, made up of departments and clear roles, and finally choose the counterparts to present the project to, from a range of sector specialists and recognized business angels, who can evaluate the strength of the project and its development opportunities, from an expert and professional point of view. The investment contract is a consequence of all the above.
Let’s clarify a few terms with you: in particular what are the NDA, the LOI, the Term Sheet and the Investment Agreement?
They are tools, or rather legal acts, used to guarantee the confidentiality of the information regarding an idea or a project presented to an interested third party, to schedule the various steps of activity, to receive or send expressions of interest on a project/idea, up to the actual investment contract that contains all the dynamics, clauses and conditions relating to equity investments or loans.
To get to the signing of an investment contract, a due diligence is certainly required: what is it?
Due diligence is a legal term of US origin that encompasses a series of activities of analysis, evaluation and control of corporate data and documents, which are usually carried out during the pre-contractual phases in corporate acquisition or merger transactions, also called M&A.
The various stages of a due diligence, which can be of a legal, tax and financial nature, ascertain the value of a company, focusing on its risks and analysing its strengths and weaknesses.
The indicators of a company’s existing critical issues are defined in jargon as “Red Flag” and identify corporate anomalies in the due diligence activity.
What are the main terms and conditions of an investment agreement for a startup?
Generally, an investment agreement is a legal transaction through which the terms and conditions of a cash payment in favour of an entity are governed.
In the case of funding from investors who want to support and accelerate the development and consolidation on the reference market of a startup or an innovative SME, there are now consolidated clauses that integrate and enrich the essential requirements of the shareholders’ agreements used for these purposes.
Some of the most recurring clauses that startup founders will be able to read in the contracts that will be submitted to them by investors are:
- lock up clauses, which establish the commitment of an issuing company or some shareholders not to carry out certain actions on the capital of the invested company, in the period following a public offering.
- so-called anti-dilution clauses, on a percent and absolute basis, i.e., safeguards that in the first case avoid the decrease in the ownership percentage when new shares are issued to third parties, and in the second case avoid a lower valuation of the investment compared to its initial value and therefore to the price initially paid, which could occur following the entry of new investors who purchase shares issued by the company at a price lower than the value of the previously issued shares;
- full ratchet clauses, which aim to reduce the conversion price of category “A” shares to the issue price of type “B” shares, thus shifting the effect of economic dilution on ordinary shares. And, then again, the so-called weighted average method, which makes it possible to mitigate the risk of economic dilution for investors, without loading the effects exclusively on the founding shareholders. Finally, the bad leaver, good leaver and vesting plan clauses included in specific “incentive plans” that joint-stock companies can adopt to remunerate their employees and collaborators or members of the board, with equity instruments, such as e.g., stock options. The last three clauses mentioned govern and regulate the methods for obtaining, disposing, and revoking the benefits of the incentives proposed and promoted by the corporate governance in favour of employees, collaborators, and directors, according to a business model that supports the business sustainability and growth.
If you are interested in Business Lawyer, please read also the interview with Chiara D’Antò Lawyer supports startup founders during their journey , the interview with Daniele Costa Lawyer for startups: from education to consultancy and the interview with Fabio Azzolina Business lawyer on a legal design approach for startups