Investment agreement in equity transactions.
The investment agreement is a constitution of relationships between the Investor and the Company or its Originators. Such an agreement gives rise to any other relationships, including provisions in the Company agreement. The majority of the time should be devoted, with the exercise of the greatest care, to the preparation of the investment agreement. Its provisions and, in consequence, the provisions of the Company agreement will govern the future relationships with the Investor for many years as well as his equity investment, his activities within the Company and any termination of membership (being a shareholder).
The investment process takes time; however, not always the full cycle beginning with a letter of intent followed by due diligence, business plans, investment agreement, etc. is required. Sometimes, in simple investments, it is possible to join together certain activities to simplify the transaction.
However, regardless of whether we represent an Investor or an Entity Seeking Capital we must always ensure that provisions are clear and precise so as to avoid disputes in the future and that the appropriate corporate balance which should be agreed by the parties to the Investment is established.
Our experience with providing legal advice for many capital investments have taught us a lesson that a well structured share purchase agreement, which provides for membership termination mechanisms, contributes greatly to the successful membership of the Company. It enables the investor to focus on the Company’s operations instead of on internal organisation issues.
Attorney-at-law Ireneusz Pawłowski