INVESTMENT AGREEMENT
What is investment:
To invest is to allocate money in the expectation of some benefit in the future. An investment is an asset intended to produce income or capital gains. In other words, Investment is using money to purchase assets in the hope that the asset will generate income over time or appreciate over time.
Investment Agreement :
A formal arrangement between a registered investment adviser and an investor stipulating the terms under which the adviser is authorized to act on behalf of the investor to manage the assets listed in the agreement. The agreement establishes the extent to which the adviser may act in a discretionary capacity to make investment decisions based on a prescribed strategy. The Investment Agreement established the terms of an investment. The Investment Agreement typically specifies such things as the amount of the investment and the rights of the investor.
The investment agreements sets forth the parameters of the investment; for example, it includes what money, if any, one party must pay to the other and the goods or services each must provide or produce. This Agreement will become legally binding once you have successfully undertaken the registration process and we have received satisfactory money laundering verification information. As the investment agreement deals with the subscription for shares by the investors in return for the investment moneys, the investment agreement should bind all investors participating, including any separate funds that are investing.
Contents :
Names and addresses of participating parties.
Basic structure of the investment.
Purpose of the investment.
Date of agreement.
Signatures of participating parties.
Important Clauses Of Investment Agreement :
1. Parties: All the existing shareholders (and in particular the founders) and the company should be a party to the agreement, although it may not be practical for all minority shareholders to be a party if there are a large number of them.
2. Confidentiality: There will be a provision in the agreement to ensure that its parties will keep all confidential information confidential. Normally, an investor is expressly allowed to disclose information to its employees, members, participants etc.
3. Costs: The Company usually pays for the investors' reasonable legal and due diligence fees or a proportion of such fees as well as its own costs and sometimes those of the founders.
4. Warranties: Warranties are representations made by the warrantors, who are usually the founders and the company, that certain statements relating to the company are true and accurate at the completion date. Although the investors will have carried out due diligence on the company and pursuant to common law would have a right to sue the founders for misrepresentation if information provided was inaccurate, the investors will prefer such statements to be expressly included in the contract.
5. Restrictive Covenants: Restrictive covenants will be found in the service agreement as well as the investment agreement. However, restrictive covenants in the investment agreement are generally more enforceable than those in the service agreement, as the founders are giving the covenants as shareholders (not employees) in part consideration for the investment.
When It Is Used :
You're forming a business and seeking investors through the sale of shares.
You're investing in a company and want to protect your interests as a shareholder.
You want to avoid or quickly address potential disputes between shareholders.
Importance Of Investment Agreement :
If you are entering into a business relationship which involves shares, or are already in such a business relationship, you can use an Investors Agreement to help secure your basic interests. Whether you're the one investing capital, or you own a business backed by investors, an Investors Agreement can help keep you protected. Small business owners may use investment agreement if they have an interest in investing in other businesses or bringing outside investors into their business. When a person invests money as part of the investment agreement, then they except to receive profit based on the efforts of a third party.