Investment Agreements |
Private Placement
Memorandums Investment Agreements |
In addition to issuing a private placement memorandum (or some other similar offering memorandum), the business also needs an investment agreement (sometimes called a subscription agreement). While the PPM provides a lot of disclosures and helps to protect the business and its principals if things don’t work out, the investment agreement is the actual contract between the business and the investor. The investor promises that they are, in fact, sophisticated or accredited investors; they understand they can potentially lose their entire investment, and they agree to pay $X. In exchange for the investment, the business is promising to give the investor the actual securities, i.e., an equity interest in the business or, in some cases, a form of debt owed by the business.
In addition to the investment agreement, investors who are receiving an equity interest in the business (whether that’s membership interests in an LLC or stock in a corporation) are usually also provided with the company’s operating agreement or corporate shareholder agreements to sign. |
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