Creating an investment agreement can provide peace of mind for an investor. This is especially important when dealing with early rounds of investment. It outlines all of the transactional details of a funding arrangement. It also provides clear expectations to the parties involved.
Investment agreements provide an investor with a legal binding document that outlines the return on investment. They also include provisions for dispute resolution and exit strategies. Depending on the type of investment, a standard investment agreement may vary.
Most investments are provided in cash, but some are provided in tangible assets. For these, the investor may want to request a flat interest rate or a rate based on the success of the investment.
An investor may also request ownership shares in the company. However, these can only be obtained if the company adheres to certain guidelines. If a business is unable to meet certain milestones, an investor can waive the condition and take their money back.
An investor should also be informed of any risks that are associated with their investment. These risks should be mentioned in the risk section of the contract. In addition, an investor should be provided with a clear exit strategy in case of an unresolved dispute or in the event that the business fails.
Investment agreements can be a valuable tool in ensuring that funds are transferred properly. It can also prevent disputes between parties. Investors can obtain certain rights such as voting rights, control rights, and confidentiality provisions.