An investment contract template is an agreement that formalizes the transaction between an investor and the company. This contract states that the investors will get an ownership interest in your company in exchange for some type of investment.
What is an investment contract?
An investment contract indicates the principal amount that the investor has invested into your company. These payments can be made in installments or as a lump sum. Investment generally is the total amount of money that an investor has contributed. Moreover, the investor must know what is mentioned in your investment contract sample.
What to include in an investment contract?
Businesses use an investment contract if they are interested to invest in another business and to bring investors from outside your company into your business.
As part of an investor agreement form, when someone invests money, they will get profits based on a third-party’s efforts. Now, there are some fields of real estate purchases that have to be included in an investment contract template, especially the hotel-condominium fighting. As an investment, if one of your transactions qualify, it can get subjected to;
- Reporting
- Registration
- Disclosure requirements
The basics of an investment contract typically explain the terms of the investment that includes when and how the investor would expect their ROI (Return of Investment). The document should include the following basic information;
- Names of the participating parties
- Addresses of the participating parties
- The investment’s basic structure
- The investment’s purpose
- The date of the agreement
- Signatures of all the participating parties
Additionally, it would be a good idea for the investors who want their investment to be in the form of ownership shares in your company to look into any important business documents that includes articles of your company or an operating agreement.
You, as the owner of the company should ensure that when you issue shares and you are in compliance with the instructions of your company. You may also let your business partners know regarding your plan of issuing shares. A good contract should include the following;
- The amount given by the investor
- The form of the investment
- The time when you will transfer the investment
Investors typically give investments in cash, wire transfer, or check. However, some investments come in the form of tangible assets.
How to write an investment contract?
On one hand, the investors have to ensure that their investment is completely protected. On the other hand, the company has to ensure that their funds get delivered smoothly. Here are some tips that you should consider while writing the contact;
Come up with the opening recitals
Here, you have to mention the date when you entered into an investor agreement and the names and addresses of involved parties. Since your company’s name will be later identified in the agreement, so you can use your company’s name and address. You should also check the investment tracking spreadsheet.
Make the “whereas” statements
This indicates that “Whereas” the investor seeks investment into its venture. Also, “Whereas” your company will give the investment. Then, you follow this up with a “Therefore” statement.
List the articles
Everything that you have discussed and previously agreed upon, these articles refer to them. However, this time, as part of your investor agreement form, they come in written form. You should ensure to list the articles one by one. Write them in order such as “Article 1,” “Article 2,” and so on.
In the contract, the typical articles will generally contain the amount of money that the person will invest and your company plans to use the investment. They also include that what the investor can expect to attain in return for their monetary contribution.
Include the details of the payment terms
The payment terms may differ from one company to another company. However, it will depend on how big of an investment you have got. Sometimes, investments are provided in lump sums. In such a case, you should list down the following;
- The amount of the transfer
- The date you have agreed upon
- The information of the receiving bank account
When the investment gets distributed across multiple payments then it is suggested that you should refer to this in an attachment. This includes the amounts and dates of each transfer into the receiving bank account.
Determine all of the deliverables
In some cases, investments may need certain benchmarks to attain by certain products or dates and to get delivered as a consequence of your company’s activities. These items are referred as the ‘deliverables.’ You should mention them in the contract along with each of their due dates.
State the term and the termination details
Here, the term refers to the length of the time. It is the time taken by the investor to complete their financial contribution and get the agreed-upon RO. In the termination part, states that how your agreement will end as well as specify that in what way you or the investor can terminate the contract sooner than what you have agreed-upon.
Indicate your company contacts
This section is used to list down the investor and your company names, titles, addresses, telephone numbers, fax numbers, email addresses, and preferred contact details.
Make the choice of law clear
It becomes important to clearly mention which state will have jurisdiction over your agreement as law may vary from one state to another.
Sign your contract
In the presence of two witnesses, the investors and the authorized persons in your company must sign the agreement. The witnesses also have to affix their signatures to the contract. One of the witness would be a Notary Public in an ideal situation. This individual will also notarize the signatures. Make two copies of the agreement so that you and the investor can get a copy for your own records.
Conclusion:
In conclusion, an investment contract template is an important document created by the companies that includes the interests of everyone involved. A lot of hard work is required to find the right investors and when you find them, it is highly suggested to have an investment contract.
