Ready for an Investment?
You need an Agreement.
An investment is a mutually beneficial arrangement between companies seeking to expand through increased capital or assets, and investors aiming to grow their wealth by earning returns on their resources. If your company is ready to expand through investments, an investment agreement should be on the list of priorities.
Whether it be equity investment, debt investment, profit-sharing venture or any other type of investment arrangement, your company’s interests are at stake and require legal protection. It is therefore crucial to have an investment agreement in place before acting on any arrangement.
Wondering what legal protections your company may get from an investment agreement? These are three core safeguards typically included:
1. Protection Against Breach of Funding Obligations.
If an investor fails to contribute funds in accordance with an agreed date, schedule, or specific milestone(s), the agreement may entitle the company to remedies including, but not limited to, compensation with interest, the withholding of investment returns, or termination of the arrangement without penalty.
2. Ownership and Equity Protection.
If the arrangement is an equity investment, the agreement will include clearly defined provisions on share ownership, equity dilution and pre-emption rights. These provisions may ensure that founders or early investors retain control of the company.
3. Confidentiality.
What if the arrangement is one where the investor is entitled to a percentage of the net profits and therefore has the right to inspect the company’s books and records? The agreement will require the investor to strictly maintain confidentiality about the company’s private financial information.
In a landscape full of opportunity and risk, an investment agreement is not just a formality, it’s a safeguard for your company’s future. Make sure your business is protected by terms that work for you.
Contributed by: Ms. Celine Deidrick, Associate Attorney
May 27, 2025
Disclaimer: This content is for informational purposes only and does not constitute legal advice.