Investor Agreement PDF Template

A strong investor agreement includes all of the basic details you need to attract and impress investors with your professional handling of their money. If the money you receive can have an ROI or return on investment over time, you may need to sign an investment agreement between your company and the parties investing funds.

You may also need to follow certain reporting, control, and regulatory guidelines or restrictions when drafting an investment agreement. If you require agreement terms that have to do with investments, ROI, and receiving funds which will be repaid to the people giving funds, you may need to sign an investor agreement such as this one.

You’ll need to do all of the proper research and homework first, but this template will give you a head-start and a good framework. You should always consult a lawyer though before finalizing any contracts.

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When you are creating any contract, you need to ask yourself about the contract's essential components. Usually, one party gives money or something of financial value in exchange for goods or services on the other side. Contracts typically have a time element, which limits the amount of time the agreement is valid. They also include regulatory aspects, such as the governing law clause, which links the contract's terms to statutes and governing laws.

If your contract stipulates the exchange of something with financial value, which is purchasing another thing of monetary value, at a fixed time in the future, you will generally need to incorporate the idea of "investment" into your contract. Investment contracts are a category, covering a wide variety of different agreements, but all contain one component, ROI, or Return on Investment.

When you talk about why a party might pay their money or give financial instruments to you or another company, you are talking about their economic interest, and that is the ROI. It's the amount of money they might make additionally by placing their initial amount as an investment. Many different formulas, structures, and guidelines apply. The basic principles are the same: over time, the investment amount will grow, and the investor can take a more significant amount away in the future.

For any contract to be valid, it generally requires a time element. The "term" is the amount of time the contract is valid for, and specifically, when it comes into effect, and when the termination is- or the end of the effect. Typically, contracts aren't signed to be in effect forever, and they always begin on a specific date. If your agreement is money for money, or in other words, the majority of benefit to one party isn't goods and services but returned cash at some point, then your contract can be classified as an investor agreement.

Investment is rarely a sure thing. ROI is always a prediction, or a forecast, not a stipulation or hard rule. When investors put money into a company, there is still some risk, and usually, the amount of risk is proportional to the reward. Investment contracts need to deal with uncertainty in some way, and one way is to offer "deal sweeteners" to allow balancing of the relatively unfavorable risk.

Because investments can be risky, there are special rules and regulations to protect the parties involved. In the US, these rules exist due to the Securities and Exchange Commission (SEC). In our template, we won't include the particular phraseology and special clauses that you need for the SEC, but you should certainly look into it if your company requires it.

In general, the SEC has rules about reporting and disclosures to investors. Some investment relationships require companies to make quarterly or special reports to all investors and even notices if certain events happen within the company. In some cases, investors might get voting rights, and offering companies should never implicitly give or deny these rights. If there is any question, your company's lawyer should always strive to include as much detail as possible, and explicitly describe what rights investors have in the company, and what rights they don't have.

The basic structure of an investment contract is relatively simple, including the same elements required for any agreement to make it legally binding and protect both parties from disputes. However, the nature of the complexity of financial instruments means that there might be any number of ways to vary the deal, to make it more attractive, or to negotiate to reduce risk. Investment offering companies might minimize the risk by staging the maturity of shares so that gradually increasing premiums are paid to investors if they keep investments in the company for longer.

You might even offer discounts for the purchase of higher amounts of shares, in the beginning, or create penalties in the contract for early divestment. Benefits for the company can be reduced or made contingent on the company reaching certain milestones. Investments can be backed by stable funds, bonds, or other instruments, effectively giving them a fallback floor, so that in case of a disaster, investors won't lose all funds.

Making investors and risk managers feel that you have reduced and mitigated the risk as much as possible will go a long way towards selling your investment offer. In the contract, you might consider answering common questions. What will happen if the company dissolves? Describe the plan in detail, and show that your investment offer is worth consideration. Give investors an idea about what legal resources might be required, who will pay, and how will investment schedules and timing be affected. Give investors a realistic understanding of your planned business processes, and it will go a long way towards making investors feel comfortable.

The more contingencies and planning involved, the lower risk involved for investors, and therefore, the more attractive the investment may appear. Investments are always subject to market conditions, so offering companies should spend a lot of resources understanding the starting benchmark. Determine how the market is working and what kind of terms and conditions other companies are offering before you start.