It is understood that investments are akin to business. Investment contracts are a legally binding document that bears the transaction of two parties regarding the money invested and the distribution of profits. If a specific party fails to meet the terms and conditions in the agreement without a legitimate excuse, it is considered a breach of contract. You may also like Contract Templates.
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There are also instances in which two businesses decide to merge. For situations like these, a partnership contract is needed to legalize the said decision. Business is a complex matter that needs sufficient attention, from minute to immense details. To help you out with these matters, you can freely make use of our templates.
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People Involved in an Investment Contract
Investing is such a risky decision to make because a specific business or individual is allocating assets for the purpose of expecting good returns.
An investment contract is also not an easy task to deal with. One can, of course, always make use of contract templates as a reference. For a contract to ensure, however, it needs people to come to an agreement. These people include the following:
- Investors – They put up money as a form of their investment expecting good profits to benefit from. Their investment may include
- equity, and
- debt securities.
- Existing Shareholders – These are the founders of the business. Should they wish to attract more investors, they need to use a profit and loss statement to show potential shareholders whether it is profitable to invest with them or not.
- Future Shareholders – This refers to the new people who will be having a share of the business in the future. They would need to assess a cash flow statement evaluate the situation before deciding to make an investment.
Example of Investment Contract
10 Things to Consider When Writing an Investment Contract
If you happen to be one of the business owners and is given a proposal, it is must that before you accept contract, you have to study it carefully or check our sample contract templates. So here are the things you must look for in the investment contract presented to you:
- The contract must be structured because there is a tendency that the agreement will eventually change if it does not meet your expectations. Be careful because some investors will mention their conditions in a subtle way and eventually you wouldn’t have any idea that your business has dramatically changed.
- There must be granting of rights. The investor must guarantee to invest his money in your business and that he should have a fair share of the benefits.
- There must be an anti-dilution protection. Investors mostly asked for this because this is a serious matter that may affect them in the event that decrease of overall percentage ownership may arise.
- Warranties should be included because circumstances like breaching promises to the business should be properly given consequences and that involves paying for the damages caused by the broken commitment.
When you are also planning to accept outside investors and partnerships, partnership contracts should be properly examined too.