Investment Rounds in Guatemala: A Legal Guide for Startups and Investors

## Investment rounds in Guatemala An investment round is the process through which a startup obtains capital from investors in exchange for equity in the company. In Guatemala, investment rounds are governed by the **Commercial Code (Decree 2-70)**, the **Securities Market Law (Decree 19-2023)**, and private agreements between the parties. --- ## Investment stages ### Pre-seed - **Amount:** Generally less than $100K - **Investors:** Founders, friends and family, angels - **Instrument:** SAFE, convertible note, or direct equity ### Seed - **Amount:** $100K - $500K - **Investors:** Angels, accelerators, micro-VC - **Instrument:** Convertible note, SAFE, or equity (preferred shares) ### Series A - **Amount:** $500K - $2M+ - **Investors:** Venture Capital - **Instrument:** Equity (preferred shares with special rights) --- ## Investment instruments ### 1. Direct equity The investor purchases shares of the company. Requires: - Agreed valuation (pre-money and post-money) - Amendment to the incorporation deed - Registration at the Commercial Registry ### 2. Convertible note The investor lends money to the startup, and the loan converts to shares at the next funding round, generally with a discount and/or cap. ### 3. SAFE (Simple Agreement for Future Equity) The investor provides capital in exchange for the right to receive shares in the future, when a valuation is defined in a subsequent round. --- ## Legal documents of a round ### Term sheet Non-binding document summarizing key terms: - Valuation (pre-money and post-money) - Investment amount - Equity percentage - Investor rights (board seat, information, veto) - Liquidation preference - Anti-dilution - Closing conditions ### Investment agreement Binding contract detailing: - Economic terms - Company representations and warranties - Post-closing commitments - Closing conditions ### Bylaw amendment If new shares are issued, the incorporation deed must be amended: - Capital increase - New share classes (if applicable) - New shareholders - Registration at the Commercial Registry --- ## Common investor rights - **Board seat:** Right to a board seat - **Information rights:** Periodic financial reports - **Veto rights:** Veto on key decisions (sale, debt, new shareholders) - **Liquidation preference:** Right to recover investment before founders in a sale - **Anti-dilution:** Protection against share issuances at a lower price - **Drag-along:** Right to force other shareholders to sell in an acquisition - **Tag-along:** Right to join a sale of founders' shares --- ## Step-by-step of a round ### Step 1: Prepare due diligence Gather: deeds, cap table, financial statements, contracts, IP, labor, tax. ### Step 2: Negotiate the term sheet Agree on key terms with the investor. ### Step 3: Investor due diligence The investor reviews all legal and financial documents. ### Step 4: Sign documents Term sheet, investment agreement, bylaw amendment. ### Step 5: Closing Funds transfer, share issuance, registration at the Commercial Registry. --- ## Regulatory considerations ### Superintendence of the Securities Market (SMV) The **Securities Market Law (Decree 19-2023)** regulates: - Public offerings of securities (require SMV registration) - Investment funds (including VC and private equity) - Exemptions for private offerings to qualified investors Private rounds to a few investors generally do not require SMV registration, but it is important to verify thresholds. ### Investment Law (Decree 9-1998) Guarantees: - National treatment of foreign investors - Free repatriation of capital and profits - Protection against expropriation without due process --- ## Documents you will need - Current incorporation deed - Updated cap table - Audited or reviewed financial statements - Founders agreement - IP registrations (trademarks, patents) - Key employee contracts - Current tax returns and payments --- ## Authorities involved | Authority | Role | |---|---| | General Commercial Registry | Registers bylaw amendments | | Superintendence of the Securities Market (SMV) | Regulates public offerings and funds | | Ministry of Economy | Single investment window | | Superintendence of Tax Administration (SAT) | Tax compliance | --- ## Legal basis - **Commercial Code** (Decree 2-70), articles 91-155 (S.A., shares, assemblies) - **Securities Market Law** (Decree 19-2023) - **Investment Law** (Decree 9-1998) - Available at: www.congreso.gob.gt *This article is informational and does not constitute legal advice.*