Investment Agreement Venture Capital

In addition to the investment agreement, there will be a number of other documents to be agreed upon, such as the statutes and terms of management`s service agreements. The investment agreement should be developed with these documents in mind to ensure their consistency. Since subsequent investment cycles are often necessary for venture capital firms, the right solution for the investment agreement can be useful for future financing. Also remember that the parties will continue to work together, so it is essential to maintain a harmonious relationship during negotiations. Venture capital investments are inherently risky and the terms of the investment contract can, from the investor`s perspective, play an important role in minimizing these risks. Any model documentation including clean and commented/commented versions of an agenda, an investment agreement, a shareholders` pact, the statutes and the statutes of the board of directors can be downloaded free of charge below. In the previous post, we considered the reference document as a list of basic agreements between the parties to the investment transaction, which are then transferred into the contract and specified. Let us now look at what clauses appear in such a treaty and what their purpose is. Bad departures – are often defined as a person with a key title who resigns in a short period of time or violates his terms of employment or the shareholder contract. As a general rule, bad leavers must resell their shares to other shareholders for a face value. Previous terms – a list of conditions that must be met before the investment is paid to the company. The preconditions may be mentioned above, but are not limited to the adoption of new statutes, the adoption of certain shareholder decisions, the signing of new employment contracts with important employees, the introduction of the or other persons and other conditions. Jalons and slicing – in general, investors will divide an investment into a few payments, called tranches, subject to different technical and/or commercial steps that will be taken.

If an important step is not met, investors may renegotiate the agreement or refuse to transfer future tranches. The slicing is used by investors to minimize risk in cases where the company deviates significantly from the agreed plan. Investors can use a ratchet to adjust the respective holdings of investors and founders based on the company`s performance or the level of returns in the event of an exit. It is essential to ensure that the investor`s capital is only underwritten when, for example, the bank facilities are in place and the management capital has been underwritten. The investment agreement will be linked to the completion of these issues, so that the investor will not be able to have subscribed the equity and that the company would then be without resources for the project due to a last minute error. The wording of these conditions must be careful to ensure that they are not circular. Model agreements can be downloaded from the CSA and SVCA website (click here to access the Singapore Law Watch and svca website).