CALGARY INVESTMENT AGREEMENT | LAWYER

Contact Neufeld Legal PC at 403-400-4092 or Chris@NeufeldLegal.com

An investment agreement (also known as an investor agreement or investment contract) is a legally binding contract between an investor and a corporation. It outlines the terms and conditions under which an individual or group of investors shall provide capital to the corporation in exchange for a return on their investment, often in the form of an ownership stake.

An investment agreement is a crucial legal document for the attainment and advancement of substantive financial investments in a corporation, with its function including:

  • Protecting Interests: The primary goal of an investment agreement is to safeguard the interests of both the investor and the corporation. The agreement serves to clearly define rights, obligations, and expectations, helping to prevent disputes.

  • Mitigating Risks: By outlining potential risks and how they will be managed, the agreement helps both parties understand and mitigate financial exposure.

  • Clarity and Transparency: An investment agreement provides a transparent framework for the investment, detailing financial terms, operational roles, and decision-making processes.

  • Formalizing the Relationship: An investment agreement formalizes the financial and legal relationship between the investor and the corporation, ensuring compliance with relevant securities legislation and regulations.

  • Setting Conditions: An investment agreement sets the conditions, terms, and mutual commitments for the investment, including how funds will be disbursed and what milestones might trigger further funding.

Central aspects of an investment agreement include:

  • Investment Details:

    • Investment Amount: The exact sum the investor will provide.

    • Form of Investment: Whether it's equity (shares), a loan, convertible note (loan that can convert to equity), or other instruments.

    • Valuation and Ownership: The agreed-upon valuation of the company and the percentage of ownership the investor will receive.

    • Tranche Payments: If the investment is disbursed in stages, the conditions and milestones for each payment.

  • Investor Rights:

    • Voting Rights: The extent of the investor's influence over company decisions, especially if it's an equity investment.

    • Board Representation: Whether the investor can appoint a representative to the company's board of directors.

    • Information Rights: The investor's right to receive regular financial reports and other company information.

    • Anti-dilution Clauses: Provisions that protect the investor's percentage ownership from being significantly reduced by future funding rounds at a lower valuation.

    • Pre-emption Rights: The right for existing investors to subscribe proportionally to new share issues.

  • Conditions Precedent: Prerequisites that must be met before the investment is finalized (e.g., regulatory approvals, due diligence completion, financial audits).

  • Representations and Warranties: Legal guarantees from both the company and the investor about their current financial health, legal standing, and the accuracy of disclosed information.

  • Confidentiality Clause: Protects sensitive business data accessed by the investor.

  • Dispute Resolution: Procedures for resolving conflicts, such as mediation or arbitration.

  • Exit Strategy: Defines how and when the investor can liquidate their investment (e.g., through a sale of shares, company acquisition, or initial public offering (IPO)). This might include:

    • Liquidation Preference: Determines the order in which proceeds are distributed in the event of the company's liquidation.

    • Drag-along Rights: Allows a majority shareholder to force minority shareholders to sell their shares if a buyer makes an offer for the entire company.

    • Tag-along Rights: Allows minority shareholders to join in on a sale initiated by a majority shareholder, ensuring they get the same terms.

  • Founder Commitments: Clauses related to the founders' continued involvement, non-compete agreements, and transfer restrictions on their shares.

Our law firm provides strategic legal advice, review and drafting of commercial business contracts to businesses in Calgary and beyond (including, investment agreements, a.k.a. investor agreements or investment contracts). Schedule an initial consultation with our law firm to learn more about how our extensive business contract legal experience can benefit your business. Call 403-400-4092 or email our law firm at Chris@NeufeldLegal.com today.

Small Business & Start-up Financing