A loyalty clause respects the obligations of the contract for future purchasers under the investment agreement. In addition, where there is a shareholder contract between shareholders, it is generally executed by requiring new investors or the purchaser to enter into a commitment agreement on compliance with the shareholder contract. If the company encounters certain business problems, the original owners should inform incoming investors through some form of risk notification. Although there are no business problems, the founders may still wish to make a statement to ensure the reliability and profitability of the investment. Series C – Typically Cornerstone or private equity investors who wish to pay in a future initial public offering, IPO An Investment Agreement, is a contract between founders and investors who wish to acquire shares in an existing company. The new investor may be a new shareholder, an outside investor or even an existing shareholder. As a general rule, a sales contract (S-P) is a legally binding contract between a buyer and a seller with respect to a transaction. We refer here to a share purchase and sale agreement that regulates the transfer of shares to a new investor at an agreed price. Click here to see an example of a free share sale contract! After the approval of a partial payment of investment funds, the question arises when should the investor pay the remaining funds? A common practice is to pay business milestones. Some common metrics include turnover, number of customers, product development, etc. This not only reduces investor risk, but also encourages founders to achieve their business goals! A restrictive pact limits the ability of shareholders to sell or transfer ownership of the company.
Confidentiality agreements would sometimes be included in the investment agreement to ensure that business information remains private. Here is a guide for beginners on the best fundraising documents and models of investment contracts for founders and entrepreneurs.