Common Investment Terms - May 2025 - Legal Transaction Definitions and Work Streams Overview

Sep 15, 2026

Common Investment Terms May 2025 provides a high-level overview of legal key transaction definitions, documents, and typical work streams used when investing in a Dutch limited liability company (B.V.). It guides investors on core concepts across venture capital, private equity, and the main deal documentation including LOI, due diligence, investment agreement, signing, and closing. It also explains conditional mechanics, warranties, indemnities, and the roles and duties of both the company and investors during the proposed transaction process.

LanguageEnglish

CategoryLetters

FormatPDF

Pages6

Reading Time2 min

AccessFree to download

Introduction

Document / Work Stream Overview

Venture capital

Private equity

Letter of Intent (LOI)

Due Diligence (DD)

Investment agreement (IA)

Signing

Closing or Completion

Condition precedent (CP)

Warranties and Indemnities

Common Investment Terms May 2025 | INTRODUCTION | | --- | | This document sets out a high-level overview of certain legal key transaction definitions, documents and "work streams"typical for an investment in a Dutch limited liability company (besloten vennootschap met beperkte aansprakelijkheid or B.V.) . This overview is prepared for guidance and discussion purposes in connection with the contemplated investment in Target B.V. (the Company) by one or more investors (the Investor(s)) (the Proposed Transaction) . | | DOCUMENT / WORK STREAM | SUMMARY DESCRIPTION | | --- | --- | | Venture capital | • Venture capital is funding provided by angel investors, seed investors, and venture capital funds to support young, innovative companies with high growth potential. These companies often lack sufficient cash flow and do not qualify for traditional bank loans due to their high-risk profiles. Venture capital enables them to navigate crucial development phases, such as product development and market expansion, by offering a minority stake through capital injection. | | Private equity | • Private equity involves capital provided by investors, often through private equity funds, asset managers, or family offices, aimed at acquiring mature companies to create value through operational improvements, strategic refocusing, enhanced governance structures, financial engineering, investment selection, and market timing. Private equity funds typically acquire a majority stake, allowing them to actively influence the company's operations and strategy. Unlike venture capital, private equity transactions usually involve the purchase of shares from sellers, financed through a mix of equity and leveraged debt. | | Letter of Intent or "LOI" | • The letter of intent (also known as heads of terms, heads of agreement or memorandum of understanding) is the initial formal document to be issued and sets out the principal proposed terms and conditions for the Proposed Transaction.
• These terms and conditions are not exhaustive and are in principle not intended to be legally binding between the parties thereto, except as specifically set out in the LOI. | | Due Diligence or "DD" | • Review of the information disclosed by the Company to the Investors in view of the Proposed Transaction to enable the Investor to establish the Company's assets and liabilities, confirm valuation of the business and comply with its investigatory duties.
• The scope of review is subject to the particulars of the transaction (e.g. less due diligence on contamination shall be required on an IT company than when acquiring a gas-station) .
• Common legal subjects to be reviewed are, amongst others, (i) corporate and (re)structuring, (ii) key management, (iii) IT, (iv) intellectual property rights, (v) data privacy and compliance, (vi) employment contracts and (key) employment terms, (vii) group financing arrangements and securities, (viii) commercial contracts, (ix) litigation and disputes, and (x) real estate. | | | • From a legal perspective, due diligence forms the basis for the Investor to comply with its mandatory obligation to properly investigate the Company and its assets and liabilities before investing in it.
• The Company on the other hand has a duty to duly disclose information to the Investor to enable the Investor to perform its due diligence (e.g. to not hold back vital information or misinform the Investor) . Further, it is often for the benefit of the Company to disclose all material information about the Company , as the IA will usually include a qualification that a founder and/or Company will not be liable for a breach of a warranty if the relevant fact or circumstance was fairly disclosed to the Investor during due diligence. | | --- | --- | | Investment agreement or "IA" | • The investment agreement between the Company and the Investor(s) , sometimes also referred to as a subscription agreement, setting out the terms and conditions (includingt

FAQs

What does the document cover for a Dutch B.V. investment transaction?

It outlines key legal transaction definitions, relevant deal documents, and typical work streams used in connection with an investment in a Dutch B.V.

How are due diligence and the parties’ duties described?

Due diligence is the investor’s review of disclosed information to assess assets, liabilities, and valuation, while the company must properly disclose material information to enable that review.

What is the role of an LOI in the proposed transaction?

The LOI is the initial formal document setting out principal proposed terms and conditions, generally not exhaustive and typically not intended to be legally binding unless specifically stated.

Sep 15, 2026

Uploaded by Oliver Hayes