For many start-ups, financing rounds are a decisive step in the further development of their company. But what is often underestimated: The costs associated with notarisation. Time and again, founders report exorbitant notary fees that are disproportionate to the actual financing.
Examples? A financing round of less than 1 million euros with notary costs of 40,000 euros. Since the first tranche of financing is just 450,000 euros, that's almost 10%!
Another case: 25,000 euros in notary fees for an amount around 250,000 euros. 10% flat!
The workload of a notary is often manageable. In contrast to lawyers, who negotiate contracts over weeks, notaries often only invest 1-2 days - and still charge similarly high bills. This article shows why this is the case and how you can protect yourself.
Problem: High notary costs for financing rounds
The amount of the notary fees depends heavily on the calculation of the so-called "Goodwill". This value forms the basis for the fees and can vary greatly depending on how it is determined. Especially inexperienced Founder:inside run the risk of accepting excessive fees without being aware of the room for manoeuvre.
Background: How are notary fees calculated?
Very simplified: The Goodwill determines the amount of the fee. Notaries typically orientate themselves on the following rates:
Financing amount: The amount actually received is deemed to be the fair Goodwill. This is the one for You as Founder:in most favourable approach.
Company valuation: If this value is used as a basis, are the costs logically fast five times so high and are no longer in proportion to the investment made.
Other contract values: Threshold values from options or clauses can also drive up the business value enormously. You can find an example of this in the section on "Pitfalls and examples".
Notaries go through the contract they have notarised step by step and add up the fees step by step for each agreement that is relevant to costs. Formally, notaries have to price in many legal aspects of a contract. However, the German Court and Notary Fees Act (GNotKG) gives notaries a certain amount of leeway. A subsequent discussion about the fees often has little success if the notary insists on his invoice. It is therefore advisable to ensure clarity in advance.
Determining the business value: Your arguments in favour of the notary
The most favourable approach for founders is to focus on the financing amount, i.e. the sum that your startup receives in this round. Your argument for talking to the notary: This is how the Goodwill reflect the actual economic core of the transaction. And not, for example, the company valuation (without "fresh money" the company would quickly become insolvent and therefore worthless) or other clauses that often only reflect possibilities in the future and do not have to be effective at all.
Pitfalls and examples
A common pitfall: Drag-Along- and Tag-Along-clauses. Notaries sometimes apply the high thresholds agreed in the contract, which would only be relevant in the event of a sale - a scenario that may never materialise. So: the drag-along clause is agreed in such a way that it only applies if the valuation is at least €100 million.
An extreme example: A notary wanted to calculate his fees on the basis of a target agreement (in the preamble to the contract) that provided for the establishment of a company with a turnover of 1 billion euros.
Summarised: Cost control strategies
How can you actually reduce notary fees?
Argumentation at the Goodwill: The economic core is the financing amount - That's what the contract is about, not anything else.
Avoidance of high values from e.g. Drag Along: Threshold values are theoretical values without direct economic advantage.
Seek dialogue at an early stage: Fortunately, many notaries are reasonable and approachable people with a heart for start-ups. Nevertheless, it is often the case that once the notarisation has taken place, there is usually nothing that can be done about the fees - so it is important to talk to them beforehand.
Compare: If the notary who can offer the next possible date is unwilling to negotiate, it is worth talking to others. Naturally, the above-mentioned GNotKG The legal framework, but as with all laws, the interpretation opens up a wide field.
Send a lawyer forward: Often it is for Your lawyer much easier to negotiate with the notary. He knows the right terms and can deal with objections.
Utilisation of the GESSI standards: These developed by Business Angels Deutschland eV (BAND). Standards reduce the proportion requiring notarisation by Regulations on values not in the Statutes are regulatedbut in the participation agreement. This is because the articles of association "must" be notarised, the participation value is then concluded in private writing without notarisation.
Conclusion
Preparation for the notary appointment is crucial in order to avoid high costs. Founder:inside the Goodwill actively scrutinise and discuss with experienced Lawyer:innen work together.
Disclaimer
innoWerft does not provide legal advice, is not qualified to do so and is not liable. We can You but pass on experiences. Talk to us.