Investment Agreement Template Free Download

Introduction

An investment agreement is a legal document that binds two parties, the company and the investor, wherein one party makes an investment of money with the aim of receiving a return on investment. It delineates the terms and conditions that will guide the investment transaction.

A simple investment agreement template must include the following elements for it to be considered valid:

• Structure of the investment
• Length of the investment
• Purpose of the investment
• Investment amount
• Equity Share
• Form of the investment
• Return on investment (ROI)
• Right of the parties

There are various types of investment agreements that you can draw out depending on the type of investment. Some of them are as follows:

• Stock Purchase Agreement,
• Convertible Debt Agreement,
• Non-statutory Stock Option Agreement,
• Statutory Stock Option Agreement,
• Restricted Stock Agreement,
• Royalty, Commission or Percent of Revenue, etc.

Investment transactions are risk intensive for both the company and the investor. Investment agreements are created mainly to manage the risks associated with investment transactions. It also helps to describe the rights, commitments, and responsibilities of both parties in multiple situations. For example, investment agreements generally mention the steps that need to be taken in case there is a dispute between the two parties.

Recitals

This section of the investment agreement template includes introductory statements of the contract. It dictates the background of both the parties and their intentions, what the agreement is about, etc. Typically, recitals do not include the rights and commitments of any parties. Rather they just provide a short introduction to the parties. You can consider this part of the investment agreement template to be similar to the preamble to the constitution of any nation.

Agreement

This section of a basic investment contract template is an essential section that includes the following subsections:

• Investment Amount, Investor expectation, and Payment method: It specifies the investment amount of the investor in change for a certain number of shares of the company. It also includes the preferred payment methods of the investor.
• Investment Timeline: This subsection specifies the timeline that will be followed by the investor for releasing payments. It could be either on a one-time or recurring basis.
• Scope of changes: Typically, both parties agree to certain conditions under which additional terms can be added to the existing contract.
• Minimum term of investment: This subsection specifies the minimum term of years for the investment before which the investment cannot be withdrawn.

Management and Control

A simple investment agreement template contains information about the executive management or the decision-makers of the company. This section of the investment agreement template contains information about the board members and majority shareholders. It also includes information about the roles and responsibilities undertaken by the management of the company.

Distribution

The ‘distribution’ section of an investment contract template free primarily contains the profit-sharing mechanism of the company. In other words, this section points out how the company is planning to distribute its profits among the various shareholders and stakeholders. The timeline of the distribution (approximate date and frequency of release of funds) is also specified in this part of the investment agreement template.

It is also recommended for companies to specify the circumstances in which the distributions may be paused or postponed.

Dissolution

This section of an investment agreement template free includes the aftermath of a situation where the dissolution of the company takes place. The company will need to pay the investor the initial investment amount plus the gains from the price difference in the stock price. It is recommended for companies to specify that investors do not have the right to payment depending on the company's physical assets.

Voting

A basic investment contract template specifies which investors or shareholders have voting rights. This section also includes how the voting process is managed in the company.

Generally, it specifies the percentage of shares that should be owned by an investor to gain voting rights. An investor with higher percentages of ownership will have more voting power. Finally, it also specifies the approximate timeline when the voting takes place, including the date and frequency of the voting process.

Nondisclosure

The ‘Nondisclosure’ section in the investment contract template free describes the confidentiality of the contract. Confidential Information can be referred to as any kind of information that is used by a company to invent trade secrets. It could be in the form of documents, patents, models, software, patent, formula, reports, etc. Trade secrets can be referred to as any information developed and owned by a company that has intrinsic financial value, primarily because it is unknown to all others except the company.

The investor must agree to keep all the confidential information and trade secrets to himself and not disclose them to any unauthorized third party.

Non Competition

Generally, the ‘Non competition’ clause of a simple investment agreement template informs the investor that during the term of the investment, the investor will not be able to seek employment or make any kind of financial gains from a competing company. There shall be no direct or indirect involvement of the investor in the functioning of the company. Even after the agreement is terminated or expired, the investor might have to respect the non competition clause for some time.

Dispute Resolution

As the name suggests, the ‘dispute resolution’ clause of a basic investment contract template help in resolving disputes as a binding or non-binding solution. This section promotes the resolution of conflicts by mediation and arbitration rather than taking the case to civil court. It helps both parties to avoid court proceedings and solve disputes inexpensively and privately.

Transfer Restrictions

The ‘transfer restriction’ provision of an investment agreement template empowers the shareholders to ensure continuity in the company’s executive management and corporate policies. This is generally done by restricting the transfer of company shares by the investors. The transfer restrictions are also imposed by ensuring that all transactions with the company stock are carried out according to the clauses mentioned in the investment agreement.

Termination

This section is generally present in all investment agreement templates. It describes the steps that need to be taken by the investor and the company in case they wish to terminate the contract. It specifies the timeline for when the investor needs to initiate the termination request.

If the investor requests to terminate the contract, the majority shareholder generally reserves the first right of refusal to buy the investor’s shares in the company. Then, the other shareholders reserve the right of refusal to buy the shares, and finally, the right goes to the third-party investors.

Generally, the majority shareholders of a company approve the sale of shares to third-party investors, other shareholders, or even competitors.

Severability

The ‘severability’ section of the investment agreement template is mainly intended to inform the investor that if a part of the investment agreement (amounting to a paragraph, section, clause, or provision) is rendered invalid by a civil court of competent jurisdiction, the remaining part of the investment agreement shall remain effective.

However, it also includes a provision that the investor and company can sign a new investment agreement if the invalidity impacts the investor’s ability to realize the purpose of the agreement.

Miscellaneous Provisions

The miscellaneous provisions in an investment agreement are the clauses that cover everything else not mentioned in the agreement. These clauses can include things like arbitration, choice of law, and severability. The miscellaneous provisions are important because they help to protect the parties involved in the agreement and ensure that the agreement is enforceable.

Entire Agreement: This section emphasizes that the Investment Agreement represents the complete understanding between the parties, superseding all prior agreements, whether written or oral, concerning the subject matter.

Amendment and Waiver: This section outlines the procedures for modifying or waiving provisions of the Investment Agreement. It stipulates that any changes or waivers must be in written form and require the signatures of both parties to be valid.

Assignment: This section addresses the issue of transferring rights or responsibilities under the Investment Agreement. It specifies whether either party has the ability to assign their rights or delegate their obligations to a third party and defines the conditions under which such assignments are permitted.

Force Majeure: This section addresses unexpected events or circumstances beyond the control of the parties that might impede or delay the fulfillment of their obligations under the Investment Agreement. It typically provides a list of force majeure events and establishes the rights and obligations of the parties in such situations.

Indemnification: This section outlines the indemnification obligations of the parties. It details the circumstances under which one party agrees to compensate and hold the other party harmless from any losses, damages, liabilities, or expenses incurred due to specified events or actions.

Survival of Terms: This section confirms that certain provisions or obligations of the Investment Agreement will remain valid and enforceable even after its termination or expiration. It specifies which provisions will endure and for what duration.

Relationship of Parties: This section clarifies that the Investment Agreement does not establish a partnership, joint venture, agency, or employer-employee relationship between the parties. It underscores that each party is an independent entity and that neither party possesses the authority to bind or act on behalf of the other.

Public Announcements: This section outlines the requirements and limitations regarding public announcements or disclosures related to the investment. It may stipulate that any public announcements necessitate mutual agreement and provide guidelines concerning the content and timing of such announcements.

Expenses: This section addresses the allocation of expenses incurred in relation to the investment. It specifies which party is responsible for specific costs, such as legal fees, due diligence expenses, or any other expenses associated with executing or performing the Investment Agreement.

Governing Language: This section designates the governing language of the Investment Agreement. It clarifies that translations or versions of the agreement in languages other than the governing language are provided for convenience purposes only, and in case of any discrepancies, the version in the governing language shall prevail.

Remember to customize these points according to your specific Investment Agreement requirements, and always seek legal advice to ensure compliance with relevant laws and regulations.

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FAQs

1. What should an investment agreement include?

An investment agreement should include the following elements:

• Structure of the investment
• Length of the investment
• Purpose of the investment
• Investment amount
• Equity Share
• Form of the investment
• Return on investment (ROI)
• Right of the parties

2. What is an investment contract?

An investor contract is a document that lays down the terms and conditions governing the investment transactions between a company and an investor.

3. What is a capital investment agreement?

A capital investment agreement is a contract between a company and an investor who wants to invest some capital amount to purchase the company stocks. The investor could be third-party investors, new shareholders, or existing shareholders.

4. What documents are required for investors?

The following documents are required for you to be eligible to be an investor:

• Proof of Identification
• Proof of Residence
• Properly filled application form
• A canceled cheque
• Cheque with the investment amount (if the mode of payment is by cheque)
• Proof of Income
• Photographs

5. Is an investment agreement the same as a shareholder agreement?

No, an investment agreement is not the same as a shareholder agreement. An investment agreement is a contract for individual investors to buy shares or ownership of a company, whereas a shareholder agreement is a contract that describes the shareholder’s rights and commitments over the company.

6. How do you write a simple investment agreement?

You can write a simple investment agreement by referring to the free investment contract template available online or make use of the following steps:

• Introduce the investor and the company
• Define the purpose and amount of investment
• Specify the payment mode and payment structure of the investment
• Include all the various clauses such as non competition, non-disclosure, dissolution, dispute resolution, etc
• Get the signature of both parties after the agreement is duly filled.