Investor Agreement

INTRODUCTION

An investor agreement is a legal contractual arrangement between two parties, out of which one is ainvestor and the other is the company. It outlines and provides for the various terms and conditions that govern the investment. It is a crucial document that gives force to the investment and also lays down the foundation for future business relationships between the investor and the company.

PROCESS

The Investor agreement contains the following:

1. Identifying the parties: The agreement begins by identifying the parties who will be subject to the terms and conditions of the contact. Such identification includes providing for the name and the details of the company, like incorporation date, CIN, business activity, office address etc. and the details of the investor like name, registered address, incorporation details (if a separate entity) etc.
2. Amount: It should specify the amount of investment and the allied details like the currency, the mode of transfer, the instalments, the form and structure of investment etc. It should also provide for the consideration that is being aid in exchange for such investment. This consideration could be equity or debt interest rates.
3. Terms and conditions: It should specify the terms against which the investment is being given and what all might be the compliances that the company has to adhere to. It may also grant powers to the investor in terms of financial supervision, appointment of nominee director, submission of reports etc.

ADVANTAGES / FEATURES

1. It is one of the most commonly used documents for start-ups
2. It establishes the foundation for future growth
3. A poorly drafted agreement may lead to hostile take overs or bankruptcy of the company.

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