What is an investment agreement?

<span data-sheets-value="{"1":2,"2":"Under an investment agreement, one party gives money to the other for use in a common enterprise to gain profit from the actions of others. Some of the common examples of this include stock purchase agreements and convertible debt agreements."}" data-sheets-userformat="{"2":15105,"3":{"1":0},"11":4,"12":0,"14":{"1":2,"2":0},"15":"Montserrat","16":8}">Under an investment agreement, one party gives money to the other for use in a common enterprise to gain profit from the actions of others. Some of the common examples of this include stock purchase agreements and convertible debt agreements.

What are some examples of investment contracts?

Investment contracts can take many forms depending on the type of investor-company relationship involved, for example: Angel investor contracts , in which original investors take equity in the start-ups in return for funds. Equity funding contracts that firms enter into with outside investors in order to raise funds. In small companies, shareholder agreements typically cover business ownership. Partnership investment agreements for joint ventures, in which multiple parties invest to run a business together.

Does an investment contract need to be notarised?

<span data-sheets-value="{"1":2,"2":"No, investment contracts don't need to be notarized. They become valid when signed by both parties. However, having a notary stamp it can be beneficial if the parties have to go to court, as it will serve as a proof of the parties voluntarily agreeing. "}" data-sheets-userformat="{"2":15105,"3":{"1":0},"11":4,"12":0,"14":{"1":2,"2":0},"15":"Montserrat","16":8}">No, investment contracts don’t need to be notarised. They become valid when signed by both parties. However, having a notary stamp it can be beneficial if the parties have to go to court, as it will serve as a proof of the parties voluntarily agreeing.

What are the key elements of an investment contract?

A good investment contract will provide sufficient detail to protect both the investor and the company. Our investment agreement sample includes the following: Amount and share allocation : how much money is invested and the shares the investor gets. Purpose of the investment : what the company will use the funds for. Management and voting rights : how decisions are made and what control investors have. Profit distribution terms : when and how investors receive returns. Non-disclosure and non-compete clauses. Termination, dissolution, and governing law . These sections make clear what both parties can expect from each other.

What are the benefits of using an investment contract template?

Using PandaDoc’s pre-made investment contract template makes things easier and safer for everyone. It protects the rights of both investor and company, and defines ownership and responsibilities. Disputes can be reduced as terms already exist for profit sharing, voting, and exit. By covering the standard legal terms and clauses, the template helps you to draft a legally enforceable investor agreement without having to start from scratch.

What are the risks associated with investment contracts?

Even with a good contract, there are some risks if terms aren’t set up correctly. M iscalculation of profit distribution or votes and disputes around share transfers or exits from the company are the most common ones . PandaDoc’s investment contract template can help you avoid many of these problems by setting the proper expectations and rules upfront.

Can I customize this template?

Yes. This investment contract template is fully editable in Word and PDF, so you can adjust it to match your situation.

Is an investment contract a security?

<span data-sheets-value="{"1":2,"2":"According to U.S. law, more specifically to the Securities Act of 1933, an investment contract is considered a security. The definition of the term \"security\" is broad enough to include many kinds of notes, contracts, and other forms of documents and property."}" data-sheets-userformat="{"2":15105,"3":{"1":0},"11":4,"12":0,"14":{"1":2,"2":0},"15":"Montserrat","16":8}">According to U.S. law, more specifically to the Securities Act of 1933, an investment contract is considered a security. The definition of the term “security” is broad enough to include many kinds of notes, contracts, and other forms of documents and property.

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Investment Contract Template

Created by:

[Sender.FirstName][Sender.LastName][Sender.Company]

Prepared for:

[Investor.FirstName][Investor.LastName] [Investor.Company]

This document is an investment contract (herein referred to as "Agreement") entered into as of (date) [Document.CreatedDate] between the following parties for the purposes of investing in the [Sender.Company]:

[Investor.FirstName][Investor.LastName] of [Investor.StreetAddress][Investor.City][Investor.State] herein referred to as "Investor" and

[Sender.Company] of [Sender.StreetAddress][Sender.City][Sender.State] herein referred to as "the Company" that is represented by [Representative.FirstName][Representative.LastName] the [Representative.Title] of [Representative.Company].

WHEREAS, [Sender.Company] is currently operating in the (industry) industry offering (List professional services and products).

WHEREAS, Investor wishes to invest in the Company, and the Company wishes to accept this Investment in exchange for shares in the company.

In consideration of the provisions and obligations in this Agreement, Investor and the Company agree to the following terms:

1. Purpose of the contract

The purpose of this contract is to protect Investor's financial investment in the Company, the Company's terms for a return on Investor's Investment Amount, the Company's Confidential Information, and the Company's market position in the (Business Industry) industry.

2. Investment

This template assumes a single class of shares. If you consider multiple share classes in your investor agreement, make sure to adjust this clause to avoid future disputes.

Investor shall invest ($0.00) ("Investment Amount") in exchange for (number) of shares in the Company's stock. Investor shall pay the Investment Amount via check or wire transfer to the Company upon the Effective Date of this Agreement.

Investor has agreed to provide the Investment Amount on a (one-time/ recurring) basis. For investments on a recurring basis, Investor agrees to provide the Investment Amount (number) times per year for a period of five (5) years in exchange for (number) shares in the Company.

Investor and the Company may agree to alternative investment terms, including adjustments to the Investment Amount and frequency of investments deposited, with a separate addendum signed by both Investor and the Company's representative.

Investor and the Company agree the investment period will be over a minimum term of (number) years in which the investment shall not be withdrawn.

3. Management and control

This investment contract template strongly favors the majority shareholder. Before using it as is, confirm that these terms match investor expectations, especially for passive investors.

The Company shall be managed by executives and the Company's (number)-person Board, as determined by the Company's majority shareholder. The Company's majority shareholder shall have explicit authority to approve all Board members and executive hires.

Executives shall handle Company management in the utmost professional conduct, including mechanisms for talent acquisition, training, SOP's, employee retention, promoting from within, and ethical standards.

4. Distribution

Net income earned by the Company in excess of ($0.00) shall be distributed to Investor in direct proportion to the number of shares owned by Investor on an (annual/ biannual) basis.

Distributions shall be made to Investors and shareholders via check or bank direct deposit on the 5th day of January and 5th day of July. Investor agrees that distributions may be paused or postponed under circumstances in which the Company needs to retain income to maintain a healthy and positive financial condition.

5. Dissolution

If a dissolution event occurs before this Agreement is terminated by Investor and the Company, the Company will pay Investor an amount equal to the original Investment Amount Investor has deposited in the Company. Investor shall be entitled to (number)% of the appreciated value of the Company based on the number of shares Investor currently owns in the company. Investor shall not have the right to payment based on physical assets of the Company.

6. Voting

Only shareholders holding greater than (amount)% of ownership in the Company shall have the right to approve actions by the Board. Upon the time Investor has greater than (amount)% of ownership in the Company, he shall be entitled to (number) of votes to approve actions by the Board.

The majority shareholder shall have the right to (number) of votes or (amount)% of the total votes distributed to investors. Voting shall occur biannually on the fifth day of January and the fifth day of July. The voting interests of the majority shall be honored by the Board.

7. Non-disclosure

For the purposes of this clause, Confidential Information means any information used by the Company to develop trade secrets, including documents, reports, programs, data, models, designs, financial plans, procedures, software, formula, patents, patent applications, or general know-how that was communicated verbally, electronically, or in print.

Trade Secrets mean information possessed and developed by the Company that holds inherent economic value because it is not known by the general public or the Company's competitors. This may include but is not limited to formulas, programs, data, techniques, processes, patterns, or other information as deemed by the Company.

Investor agrees to keep all Confidential Information and Trade Secrets in the strictest of confidence and shall not disclose Confidential Information or Trade Secrets to any unauthorized third party. Failure to keep Confidential Information and Trade Secrets confidential may result in legal action taken by the Company against Investor, and Investor will be required to pay any and all of the Company's attorney fees.

8. Non-competition

Investor agrees that during the duration of the investment relationship between Investor and the Company, Investor shall not be employed or financially interested, either directly or indirectly, in the same or similar business as the Company. If this Agreement expires or is terminated, Investor is bound to this non-competition clause for a period of three (3) years.

9. Termination

To terminate this Agreement, Investor and the Company must agree to and sign a termination contract pursuant to this section. The termination request shall be initiated by the Investor no later than 60 days prior to the intended termination.

In the event Investor wishes to terminate this Agreement, the majority shareholder shall have the first right of refusal to purchase Investor's shares. If the majority shareholder does not purchase Investor's shares, other shareholders shall have the first right of refusal before Investor seeks to sell their shares to another third party.

Investor shall not sell shares to any individual or company that is in the same industry as the Company. The Company's majority shareholder shall have final approval of who may purchase Investor's shares.

10. Severability

If a court of competent jurisdiction finds that any section, paragraph, clause, or provision of this Agreement is invalid or otherwise unenforceable, the remaining clauses in the Agreement shall remain in full force and effect.

If the invalidity or illegality of any section, paragraph, clause, or provision of this Agreement greatly impacts the ability of Investor and the Company to achieve the purposes of this Agreement, Investor and the Company shall draft and sign a new agreement as soon as possible.

[Investor.Title]

Signature

MM / DD / YYYY

[Representative.Title]

Signature

MM / DD / YYYY

[Investor.FirstName][Investor.LastName]

[Representative.FirstName][Representative.LastName]

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FAQ

Under an investment agreement, one party gives money to the other for use in a common enterprise to gain profit from the actions of others. Some of the common examples of this include stock purchase agreements and convertible debt agreements.

Investment contracts can take many forms depending on the type of investor-company relationship involved, for example:
Angel investor contracts, in which original investors take equity in the start-ups in return for funds.
Equity funding contracts that firms enter into with outside investors in order to raise funds.
In small companies, shareholder agreements typically cover business ownership.
Partnership investment agreements for joint ventures, in which multiple parties invest to run a business together.

No, investment contracts don’t need to be notarised. They become valid when signed by both parties. However, having a notary stamp it can be beneficial if the parties have to go to court, as it will serve as a proof of the parties voluntarily agreeing.

A good investment contract will provide sufficient detail to protect both the investor and the company. Our investment agreement sample includes the following:
Amount and share allocation: how much money is invested and the shares the investor gets.
Purpose of the investment: what the company will use the funds for.
Management and voting rights: how decisions are made and what control investors have.
Profit distribution terms: when and how investors receive returns.
Non-disclosure and non-compete clauses.
Termination, dissolution, and governing law.
These sections make clear what both parties can expect from each other.

Using PandaDoc’s pre-made investment contract template makes things easier and safer for everyone. It protects the rights of both investor and company, and defines ownership and responsibilities. Disputes can be reduced as terms already exist for profit sharing, voting, and exit.
By covering the standard legal terms and clauses, the template helps you to draft a legally enforceable investor agreement without having to start from scratch.

Even with a good contract, there are some risks if terms aren’t set up correctly. Miscalculation of profit distribution or votes and disputes around share transfers or exits from the company are the most common ones.
PandaDoc’s investment contract template can help you avoid many of these problems by setting the proper expectations and rules upfront.

Yes. This investment contract template is fully editable in Word and PDF, so you can adjust it to match your situation.

According to U.S. law, more specifically to the Securities Act of 1933, an investment contract is considered a security. The definition of the term “security” is broad enough to include many kinds of notes, contracts, and other forms of documents and property.

This distribution agreement template is designed to help UK distributors accelerate their document signing process. Download your free copy today.

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