Venture Capital Comparative Guide

1 Legal framework

1.1 Which general legislative provisions have relevance to venture capital investment in your jurisdiction?

The legislative provisions applicable in Ireland depend on the type of vehicle employed by the startup, which is typically determined by:

• the nature of its business;
• its activities; and
• the location of its target investors.

Foreign businesses often establish holding companies in Ireland with both Irish and foreign operating subsidiaries.

Irish businesses typically incorporate their operating companies in Ireland and, where needed, establish Irish holding companies. In rare cases, Irish operating companies may establish holding companies in jurisdictions such as the United States or the United Kingdom when required by major investors due to fund restrictions or tax considerations.

These companies are typically organised as:

• private companies limited by shares, governed primarily by the Companies Act 2014 – this is the most common corporate vehicle used; or
• designated activity companies, governed by the Companies Act 2014 – often used by startups with specific objects or regulatory requirements.

Additional statutes may apply depending on the activities undertaken by the startup. For instance:

• the Taxes Consolidation Act 1997 contains relevant tax provisions, including the Employment and Investment Incentive Scheme;
• the European Union (Markets in Crypto-Assets) Regulations may apply to startups involved in crypto-assets and digital finance; and
• various licensing regimes administered by the Central Bank of Ireland may apply to startups operating in regulated financial services sectors.

Ireland has a thriving startup scene supported by various government initiatives, such as:

• Enterprise Ireland (for local businesses); and
• IDA Ireland (to attract foreign businesses).

These initiatives encourage businesses – including startups – to establish operations in Ireland, fostering integration into the local innovation ecosystem. Google, Meta, Microsoft, Apple, OpenAI, Pfizer, Johnson & Johnson and AbbVie, among many others, have their European, Middle East and Africa headquarters and/or major operations in Ireland, producing a well-trained talent pool and the next wave of founders. However, the focus of this Q&A is on both domestic Irish startups and international startups that utilise Irish company structures to raise capital.

1.2 What specific factors in your jurisdiction have particular relevance for, or appeal to, venture capital investors?

Ireland is one of the leading European jurisdictions in which to structure international transactions, for a variety of reasons, including:

• EU membership, with access to the single market and various freedoms of movement;
• a skilled workforce, particularly strong in technology, life sciences and financial services;
• a business-friendly environment; and
• an established financial services industry with well-developed legal frameworks and experienced financial services professionals, including:
• • lawyers;
  • accountants; and
  • corporate service providers.

Given that Ireland is a leading domicile for investment funds in Europe, many of the venture capital and private equity firms which invest in Irish structured startups are already familiar and comfortable with the jurisdiction. Ireland is home to 6% of worldwide investment fund assets, making it the third-largest centre in the world and the second-largest in Europe.

Ireland is a common law jurisdiction with a well-established legal system. The High Court has unlimited jurisdiction over complex commercial disputes, while the Court of Appeal reviews decisions from the High Court. The Commercial Court, established as part of the High Court, was created to deal efficiently with commercial disputes of significant importance. The Supreme Court is the final court of appeal in Ireland.

Ireland is a member of the European Union and offers a stable political and regulatory environment, which provides consistency and certainty. It is fully committed to implementing and maintaining international anti-money laundering and countering the financing of terrorism compliance standards, with robust regulatory oversight provided by the Central Bank of Ireland and other regulatory bodies.

2 Parties

2.1 What types of investors typically provide venture capital investment in your jurisdiction?

As in other jurisdictions, the types of investors that choose to invest in Irish structures vary depending on the stage of the business's growth and maturity.

At the early or pre-seed stage, funding often comes from:

• the founders' personal networks, such as friends and family;
• angel investors;
• accelerators;
• incubators;
• family offices;
• high-net-worth individuals; and
• early-stage venture capital firms.

As the startup develops and progresses to priced equity rounds, the investor profile typically shifts. At this stage, traditional venture capital and private equity firms, institutional investors and large corporate venture capital investors become the major investors. These investors often specialise in funding businesses at specific stages, whether in early growth or later-stage expansion.

2.2 What types of companies do venture capital investors typically seek to invest in in your jurisdiction? Is the investment done directly or through foreign holding structures?

The diverse nature of businesses utilising Irish structures means that these startups span various sectors. However, the most common industries include:

• technology;
• biotech, pharma and healthcare;
• financial services; and
• AI.

For foreign businesses that adopt an Irish holding structure, investments are usually made directly into the Irish entity. The downstream structure is influenced by legal, tax and regulatory considerations in the jurisdiction where the underlying business operates.

Additionally, investors are advised to seek independent tax advice to assess any potential tax implications associated with investing in an Irish structure.

2.3 How are these companies typically structured?

Please see question 1.1.

3 Structuring considerations

3.1 How are venture capital investments typically structured in your jurisdiction (eg, equity, quasi-equity (SAFE/KISS), debt, other), and how does structuring typically differ between seed-stage, early-stage and later-stage investments?

Venture capital investments in Ireland are typically structured to align with:

• the fundraising objectives of the startup;
• its stage of maturity; and
• the financial risk appetite of the investors.

In earlier rounds, it is common to see the issuance of convertible notes or (less so) simple agreements for future equity (SAFEs) by Irish companies. As the company grows, develops its business and increases in valuation, it usually transitions to priced equity rounds, also referred to as 'preference share financings'. SAFEs or convertible notes are also frequently used in bridge rounds to provide interim financing between priced rounds.

Depending on their stage of development and suitability, some Ireland-based startups also engage in venture debt deals. In such cases, the lending typically occurs at the level of the operating business, rather than at the holding company level. These arrangements often involve:

• security being granted over the assets and undertaking of the business; and
• lenders negotiating warrants issued by the holding company that can be exercised upon certain trigger events.

3.2 What are the potential advantages and disadvantages of the available investment structures?

The potential advantages and disadvantages of various investment structures are not unique to Ireland. The decision on which structure to adopt is influenced by several factors, including:

• the company's urgency in raising capital;
• investor sentiment;
• dilution considerations; and
• the level of investor protections required.

For example, equity structures such as priced rounds can offer strong investor protections and long-term alignment with the company's growth, but they often lead to significant dilution for existing shareholders. Convertible instruments such as SAFEs or convertible notes are more flexible and allow for quicker capital raises, but they may provide less protection for investors. Venture debt, while less dilutive, may impose financial obligations and risks, especially for early-stage startups with limited cash flow.

Ultimately, the choice of structure should balance the needs and expectations of both the company and its investors while aligning with the long-term strategic goals of the business.

3.3 What specific issues should be borne in mind in relation to cross-border venture capital investments?

Consideration should always be given to the tax, legal and regulatory implications of the jurisdictions of each stakeholder involved in the transaction, including:

• the founders;
• the investors; and
• the underlying operating businesses.

3.4 What specific issues should be borne in mind when multiple investors are involved (eg, pooling)?

While the interests of investors will be broadly aligned, each investor will ultimately have its own risk appetite and will have set its own expectations regarding:

• the progress and the time horizon for the investment; and
• ultimately, its exit.

These factors will ultimately impact the investor rights and protection and governance and decision-making terms which will be negotiated into the investment documentation.

4 Investment process

4.1 How does the investment process typically unfold? What are the key milestones?

Once a target has been identified by an investor and a term sheet setting out the proposed commercial terms has been negotiated and executed, due diligence will be carried out on the proposed target by the investors (see question 4.2). In parallel, legal counsel to the company and the investor(s) will work together to draft and agree the legal documentation and any necessary corporate approvals in relation to the investment.

From an Irish law perspective, there are certain steps which need to be taken at closing under Irish company law. These include:

• filing any shareholder resolutions (eg, amending the constitution of the company with the Companies Registration Office within 21 days of the resolution being passed);
• updating the register of members of the Irish company to reflect the issuance of the new shares (or the repurchase or transfer of any shares) in accordance with the requirements of the Companies Act 2014; and
• updating the register of directors in connection with any director appointments or resignations and filing the associated forms with the Companies Registration Office within 14 days.

4.2 What types of due diligence (eg, legal, financial, technical) do venture capital investors typically conduct into prospective portfolio companies? What are key red flags for venture capital investors?

Typically, the lead investor(s) will conduct legal, financial and commercial due diligence before proceeding with any investment, although the extent of the due diligence:

• will vary depending on factors such as:
• • the maturity of the business; and
  • the size of the investment; and
• will be guided by the investor and its advisers.

The investor will want to confirm, among other things:

• that the company is in good standing;
• that the register of members aligns with the capitalisation table;
• the current director and officer appointments;
• that the company complies with all regulatory obligations (if any); and
• that there are generally no unforeseen issues from an Irish law perspective (eg, the holding of intellectual property, which can be burdensome from an economic substance perspective).

4.3 What documentation is typically prepared during the investment process and who is responsible for preparing this?

For priced equity rounds, the commercial terms negotiated in the term sheet will be reflected in:

• a share subscription agreement;
• a shareholders' agreement;
• a constitution; and
• various ancillary documents.

Legal documentation largely follows the British Venture Capital Association (BVCA) style and is prepared by counsel for the company and investor(s) working together. Counsel for the investor(s) typically prepare the first drafts.

In each case, corporate approvals at both a board and shareholder level authorising entry into the above documentation and any related actions will also be prepared.

4.4 Are standard investment documents available for venture capital investments in your jurisdiction? If so, who (eg, industry association, organisation) provides them and how frequently are they used in practice?

Venture capital transactions use documentation similar to the model legal documents produced by the BVCA, which have been adapted to take into consideration Ireland specific requirements.

For SAFEs, a localised version of Y Combinator's standard form SAFE and pro rata side letter is used.

4.5 What disclosure requirements and restrictions may apply throughout the investment process, for both the venture capital investor and the prospective portfolio company?

The majority of the disclosure requirements during the investment process will be driven by:

• the term sheet that has been executed in relation to the proposed investment; and
• any disclosure against the representations and warranties negotiated in the share subscription agreement as a result of the investment due diligence.

4.6 What advisers and other stakeholders are involved in the investment process?

Venture capital deals in Ireland involve a range of advisers and stakeholders, each of which plays an integral role in relation to its structuring, negotiation and implementation, from initial term sheet to closing.

The principal legal advisers are Irish legal counsel and international legal counsel (frequently an international law firm with experience in cross-border venture capital transactions and deal terms), often with the involvement of local legal counsel, who may be based where the underlying business actually operates.

Tax advisers or accountants will also play a key role in advising on:

• the tax implications of the investment; and
• any related structuring questions.

4.7 What is the process and what (corporate) approvals are required for a portfolio company to issue shares or debt instruments to investors in your jurisdiction?

The process and corporate approvals required for issuing shares or debt instruments will be governed by the terms of the existing constitution of the company and the shareholders' agreements currently in place, which will vary depending on the growth stage of the startup.

Under Irish law:

• the issuance of shares or debt instruments will typically require board approval; and
• any amendment to the authorised share capital or constitution (eg, to create a preferred share class) will require shareholder approval.

To the extent that the company has already issued equity to investors, it is likely that any further issuance of shares will require:

• protective provision consent; and
• that any rights of first offer or pre-emption be waived (to the extent that these will not be exercised).

5 Equity investment terms

5.1 What key investment documents and terms (eg, valuation, share class, governance rights, liability concept, transfer restrictions, exit rights) typically feature in venture capital equity investments in your jurisdiction?

The key commercial terms of any investment will be negotiated and agreed in a term sheet between the company and the investor(s). These will then form the basis for the legal documentation. See question 4.3 in relation to legal documentation.

The term sheet will address various commercial terms, including:

• the size of the proposed investment;
• the company's valuation; and
• the price per share at which the investor will be investing.

In addition, it will set out:

• the rights which will attach to the class of preference shares to be subscribed – for example:
• • the liquidation preference;
  • the dividend preference; and
  • any veto rights;
• any governance rights;
• anti-dilution measures;
• transfer rights and restrictions; and
• information and reporting rights.

5.2 What type of security is typically issued to new investors as part of venture capital equity investments in your jurisdiction and what (economic) preference rights are typically attached to these securities (by operation of law, under constitutional documents and/or contractually)? What rules and requirements apply in this regard?

In a priced equity round, investors will usually be issued preference shares. The commercial terms attached to these shares will be a matter for negotiation (typically by the investor(s) leading the financing round), but will usually include:

• a liquidation preference;
• a dividend preference;
• conversion rights;
• anti-dilution protection;
• certain veto rights; and
• board representation.

The rights attached to the preference shares will be set out in:

• the constitution; and
• the accompanying financing agreements.

It is a basic principle under Irish law that all investors holding shares in the same class must be treated equally with respect to their class rights. Therefore, consideration should always be given to the rights being granted to shareholders in any particular class or series.

5.3 What anti-dilution measures or rights (eg, pre-emptive rights, down-round protection) typically feature in venture capital equity investments in your jurisdiction?

It is common to see investors negotiate standard anti-dilution measures into the financing documentation. These include:

• pre-emption rights in case of the issuance of any additional securities;
• protective provisions or veto rights in relation to the issuance of additional securities with rights pari passu or senior to the existing preference shares; and
• conversion price adjustment mechanisms in the case of certain dilutive issuances.

5.4 What are the key features of the liability regime (eg, representations and warranties, disclosure concept, liability caps, remedies) that applies to venture capital investments in your jurisdiction?

Standard features typically include:

• representations and warranties;
• provisions for disclosure against these;
• negotiated monetary caps;
• time limits; and
• where relevant, agreed carveouts.

Under Irish law, remedies for breaches of representations and warranties are grounded in common law principles. These remedies may include:

• rescission;
• damages; or
• in certain cases, specific performance.

However, specific performance is a discretionary remedy and may only be granted in appropriate circumstances.

5.5 What key transfer rights and restrictions (eg, lock-up period, right of first offer/right of first refusal, drag/tag-along rights, purchase options) typically feature in venture capital investments in your jurisdiction? Are (reverse) vesting/good and bad leaver provisions commonly applied to founders in your jurisdiction? If so, how are these typically structured?

Key transfer rights and restrictions will be contained in:

• the investment agreements; and
• the constitution.

The investment agreements will typically contain rights of first refusal in case shareholders wish to transfer some or all of their shares to a third party. Normally, there will be certain exceptions to any such restrictions on transfers. For instance, transfers by a founder to an estate planning vehicle or an investor to a group affiliate will often be permitted. Co-sale and tag-along/drag-along rights are also standard rights.

Under the constitution:

• it is relatively standard that the board of directors must approve all share transfers; and
• sometimes there may be further restrictions on transfers to competitors.

5.6 What management incentives (eg, equity, options, phantom shares) typically feature in venture capital investments in your jurisdiction?

It is common to see share option or share incentive plans implemented to advance the interests of the company and its wider group by:

• providing an incentive to attract, retain and reward employees and individuals performing services; and
• motivating such persons to contribute to the growth and profitability of the business.

The share option or share incentive plan is normally administered by the board of directors, unless a specific committee has been established to oversee the same. A cap on the total number of shares available for the share option or share incentive plan is always agreed.

It is common for investors to insist that founders enter into a lock-up agreement, with the company being granted a repurchase option in certain circumstances in case the founder should leave the company prior to the shares fully vesting. Good/bad leaver provisions typically apply.

6 Debt investment terms

6.1 What terms typically feature in non-equity venture capital investments in your jurisdiction?

Venture debt is becoming increasingly common in Ireland. This typically involves the following:

• Security will be granted over the assets and undertaking of the business as collateral for the loan; and/or
• The holding company will issue warrants as part of the terms of the debt deal.

Where there is a holding company structure, it is common for the loan to be provided directly to the Irish trading company (which generates revenue and requires the capital), while warrants or other equity-linked instruments are issued by the Irish holding company as additional consideration for the debt provider.

Convertible loan notes are also a popular form of non-equity investment in Ireland. These instruments allow investors to provide debt financing that can convert into equity upon the occurrence of specified trigger events, such as a subsequent equity funding round or an exit event. The conversion terms, including conversion discounts and valuation caps, are typically negotiated as part of the initial investment terms.

6.2 How are such non-equity investments typically treated in the event of (a) an equity investment, (b) a change of control and/or (c) maturity?

How non-equity venture capital investments are treated in case of these events will be a matter for negotiation, but it is common for such events to trigger:

• repayment; or
• in the case of convertible debt, conversion.

7 Governance and oversight

7.1 What are the typical governance arrangements of venture capital portfolio companies?

An Irish company must have at least one director and at least one director must be resident in a member state of the European Economic Area (otherwise, an inexpensive financial bond can be obtained).

The board of director(s) of an Irish company are collectively responsible for the management of the company. The board may in turn delegate certain power or authority to officers of the company or a specific committee.

The board will normally be composed of a mix of:

• founders;
• directors nominated by investors pursuant to the investment agreements; and
• sometimes, independent directors or a chairperson.

The investment agreements will often also contain voting rights or protective provision consents, ensuring that major investors have input on certain strategic or key decisions impacting the company.

7.2 What legal considerations should venture capital investors take into account when putting forward nominees to the board of portfolio companies?

Individuals serving as directors of an Irish company should be aware of the duties and obligations that directors have under Irish law.

Directors' duties and obligations under Irish law derive from both statutory provisions in the Companies Act 2014 and common law principles. At common law, a director owes two types of duties to the company:

• fiduciary duties, including:
• • a duty to act in good faith;
  • a duty to exercise powers in the company's interests;
  • a duty to avoid conflicts of interest; and
  • a duty not to make secret profits; and
• duties of skill and care.

Under Irish law, directors are responsible to the company and not, in the absence of special circumstances, to the members as individuals (eg, including the investor that has appointed the director in question). For the purposes of describing directors' duties, the company is generally defined with reference to the interests of both present and future members of the company as a whole. If a company is in financial difficulty, the interests of the company may include those of creditors.

A director may be personally liable in damages for breaching:

• fiduciary duties; or
• duties of care, diligence and skill.

Directors should thus always consider their duties and responsibilities when charting a course of conduct with respect to the company and its interests.

Although the fact that a decision turns out to be wrong or not beneficial, or causes loss, will not necessarily give rise to liability, if there is the least doubt or concern about a particular approach or action and how it might impinge upon or otherwise interact with the director's duties and obligations, legal advice should be obtained without delay.

7.3 Can a venture capital investor and/or its nominated directors typically veto significant corporate decisions of a portfolio company? If so, what are the common types of corporate decisions over which a venture capital investor might request veto rights?

This will depend on the terms negotiated for any particular investment, but it is common for certain strategic matters or matters over a particular monetary threshold to require board approval or major investor approval under the investment agreements and constitution.

7.4 What information and reporting rights do venture capital investors typically enjoy in your jurisdiction (by law and contractually)?

The information and reporting rights of investors usually derive from:

• the investment agreements, which will typically require the provision of financial statements and management reports; and
• the constitution, which will typically provide for extremely limited rights to inspect the books and records of the company.

7.5 What other legal tools and strategies are available to venture capital investors or other minority investors to monitor and influence the performance of portfolio companies?

Major investors may also negotiate for:

• more frequent reporting;
• enhanced access to information; or
• inspection rights – that is, the ability to:
• • enter the premises;
  • speak to staff; and/or
  • appoint advisers to review the company's books.

Some investors may also negotiate the appointment of a board observer who, on a confidential basis, may attend all board meetings and receive information otherwise shared with the directors (but not vote).

8 Exit

8.1 What exit strategies are typically pursued by venture capital investors in your jurisdiction?

The most common exit strategies pursued by startups include:

• private equity M&A transactions;
• strategic M&A transactions;
• secondary share sales; and
• initial public offerings (IPOs).

The choice of the most suitable strategy depends on various factors and the exit may take place at the level of either the Irish holding company or one of its subsidiaries.

Irish companies may pursue IPOs on various international stock exchanges, including:

• Euronext Dublin;
• the London Stock Exchange;
• NASDAQ; and
• the New York Stock Exchange.

The choice of listing venue will depend on factors such as:

• the company's business model;
• the investor base; and
• strategic objectives.

8.2 What specific legal and regulatory considerations (if any) should be borne in mind when pursuing each of these different strategies in your jurisdiction?

The investment agreements and constitution in place at the time of the proposed exit will dictate the approvals which will need to be obtained in order to pursue any proposed strategy.

9 Tax considerations

9.1 What are the key tax considerations in relation to venture capital equity investment in your jurisdiction?

Ireland offers a competitive tax environment for venture capital investments. Key considerations include:

• corporation tax at 12.5% on trading income;
• capital gains tax relief for qualifying investments; and
• various incentive schemes, such as the Employment and Investment Incentive Scheme.

The specific tax treatment will depend on:

• the structure of the investment; and
• the status of the investors.

9.2 What are the key tax considerations in relation to venture capital debt investments in your jurisdiction?

Venture debt investments in Ireland are subject to Irish tax rules. Interest payments are generally deductible for the borrower and taxable for the lender. Withholding tax may apply to interest payments depending on the residence and status of the lender. The tax treatment of warrants or equity-linked instruments will depend on their specific terms and structure.

9.3 What are the key tax considerations in relation to equity-related incentive schemes in the context of venture capital investments in your jurisdiction?

Ireland provides various tax-advantaged employee share schemes, including:

• the Key Employee Engagement Programme;
• share option schemes; and
• approved profit-sharing schemes.

The tax treatment depends on:

• the specific scheme used; and
• the timing of exercise and disposal.

Professional tax advice should be obtained to optimise the tax efficiency of any equity incentive arrangements.

10 Disputes

10.1 What kinds of disputes typically arise in relation to venture capital investments in your jurisdiction and how are they typically resolved?

Venture capital investments involve a range of stakeholders, which can lead to tensions and disputes at various stages of a business's lifecycle. These conflicts are not uncommon and often stem from the complexities of balancing interests among the parties involved.

Typical disputes include:

• disagreements between founders;
• conflicts between the company and departing employees; and
• issues between founders and shareholders.

These are particularly prevalent in situations involving:

• breaches of shareholder agreements;
• financial difficulties; or
• claims of minority shareholder oppression.

In more severe cases, disputes may arise from allegations of:

• fraud;
• misrepresentation; or
• mismanagement.

To address such disputes, investment agreements generally include well-defined dispute resolution provisions. These clauses outline the procedures for resolving conflicts, frequently opting for mediation. The choice of mediation location and governing rules is usually influenced by the jurisdiction of:

• the founders;
• the business; or
• major investors.

Mediation ensures a structured, efficient resolution process while maintaining confidentiality, which is often preferred.

11 Trends and predictions

11.1 How would you describe the current venture capital landscape and prevailing trends in your jurisdiction? What are regarded as the key opportunities and main challenges for the coming 12 months?

The Irish venture capital market demonstrates resilience amid global economic headwinds, with several positive indicators emerging for 2025. Market fundamentals supporting this outlook include:

• renewed activity in the global initial public offering and M&A markets;
• a vibrant startup and scale-up ecosystem with new businesses constantly emerging; and
• the availability of venture capital funding for the right opportunities.

Greater liquidity in these markets is expected to facilitate further fundraising and investments into Irish startups and scale-ups.

Ireland remains strategically positioned to play a pivotal role in the European venture capital industry. As a leading EU jurisdiction for fund management and corporate headquarters, it continues to attract international investors and fund managers. Its robust legal framework, competitive tax regime, skilled workforce and EU market access are major draws for venture capital activity.

Looking ahead, many startups aiming to secure international funding are anticipated to continue establishing Irish-based holding structures to take advantage of Ireland's business-friendly environment and EU market access.

11.2 Are any developments anticipated in the next 12 months, including any proposed legislative reforms in the legal or tax framework?

We do not expect any legislation which will significantly overhaul the venture capital industry in the next 12 months. However, ongoing developments in EU regulations and various ESG reporting requirements continue to shape the regulatory landscape. Irish companies and funds must stay abreast of these evolving requirements to ensure compliance.

12 Tips and traps

12.1 What are your tips to maximise the opportunities that venture capital presents in your jurisdiction, for both investors and portfolio companies, and what potential issues or limitations would you highlight?

To maximise the opportunities that venture capital offers when utilising Irish structures, both investors and portfolio companies should take full advantage of the jurisdiction's competitive business environment and its strong reputation for attracting international investment. Irish entities are particularly attractive due to:

• their corporate flexibility;
• Ireland's competitive corporate tax regime; and
• the jurisdiction's robust legal framework.

It is therefore crucial for investors and startups to engage experienced legal and tax advisers who specialise in Irish corporate structures and venture capital transactions. These advisers can help to:

• navigate legal and regulatory requirements;
• mitigate potential risks; and
• optimise tax and operational efficiencies.

By doing so, all stakeholders will be better positioned to achieve long-term success in an increasingly dynamic investment environment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.