On the other hand, an investment contract is specifically focused on a specific investment for which the investor can obtain equity in the company or if leverage agreements can be entered into (in fact, a loan to the company). The investor may already be a shareholder or a new third-party investor. A thorough review of a draft existing investment contract is needed to identify areas that need to be adapted. The main standard information includes the number of shares offered, the price of each share and a guarantee and representation sector that verifies that an investor is qualified to buy shares of private companies. Other important inclusions are a compensation clause that requires investors to pay the company fines that threaten the company if an unqualified investor shows up incorrectly. Restrictive agreements such as a confidentiality clause, a non-compete agreement and a clause prohibiting investors from recruiting existing customers or damaging the name or reputation of the company are also important. It is important to know how they prepare an investment agreement before making a new investment in your business. This article examines the key provisions that should be incorporated into an investment agreement and outlines the possibilities for a company to protect itself and ensure the security of its relationship with a new investor. Getting investment is a happy time for any new business. It usually takes a lot of work to find the right investor. If you do, it is important to have an investment contract that represents the interests of all parties involved. The investor will want to ensure that his investment is protected and the company will want to ensure that the funds are delivered smoothly and that the founders have protected their participation in the company. An investment contract should also determine whether the investor has management or control rights within the company.
For example, investors sometimes get voting rights that allow them to have a say in business and management. Investors may have the right to vote for directors or executives. For small businesses, an investor may have the direct right to control the day-to-day life of businesses. In your investment contract, you must indicate the type of reports that the investor can expect regarding the finances of the company and whether the investor has the right to check the accounts. These conditions vary from company to company and often depend on the size of the investment. Sometimes the investment is indicated as a lump sum payment, in which case the amount of the transfer, the agreed date and the details of the bank account must be indicated. An investment contract is a contract between a company and its shareholders and an investor that regulates an investment project in the company.