As a result, an investor`s starting position is usually to resist the founders, who are legal advisors on investment documents – especially because it is the investor`s money that should pay the legal fees directly or indirectly. However, as a founder, you should try to convince the investor that such an attitude is counterproductive and that it is much better for you to get a complete understanding of the details of the investment documentation you want to grasp, if you want to create a strong and continuous relationship between you. As the middle track of the „anti-dilution clause,“ you should emphasize what is called a „semi-tricchet.“ In this scenario, the external investor would buy additional shares on a weighted formula generally closer to the actual share market price. So if an investor cashed in $3 million, had a „triple dip“ clause and the business was sold for $10 million, they would first receive $9 million, so there would be only $1 million left for you and the other common investors. Your contract must indicate when an investor can count on an ROI. If he or she does not get a return, the investor may require you to return the investment. A liquidation preference is just a chic way to describe in what order and how different business owners are paid in the event of a sale or bankruptcy. In its simplest form, in a company without external investors, if you owned 30 percent of the business, if you sold, you would have 30 percent of the proceeds after all unpaid bills were paid. Each company has statutes – which often include the „model articles“ of the Corporate Act (with small amendments), which are usually adopted by default when they are created. The statutes can be akin to a „club constitution“ – which occasionally contains a binding agreement between the company and the shareholders. Such a document can be quite impenetrable for a layman – and it is above all for this reason that some early investments do not prepare the specially developed statutes.
Most investments are available in cheques, cash or transfers. However, some investments are provided as tangible assets. The treaty should show whether that is the case. In the case of tangible investments, you need to figure out how to continue the business if the investor requests that these assets be returned. The contract should determine whether the investor has rights within the company, such as control or management rights. For example, some investors may obtain voting rights in a company that allows them to have a say in the management of the business. Investors can vote for executives or directors.