Investment Contracts, What To Look Out For.

Investment contracts are agreements where in one party invest money with the expectation of receiving a return on investment.

These contracts are used in various industries including Health care sectors, Real estate, hotels etc.

What to look out for in an investment contract

1. Basic terms of an investment contract ;

2. Return on investment;

3. Reporting and control;

4. Contract strategy.

Basic terms of an investment contract

Small business owners may use investment contracts if they have an interest in investing in other businesses or bringing outside investors into their business.

When a person invest in a business he or she expects to receive profit from the 3rd party.

Basic terms in an investment contract

· Names and address of participating parties

· Basic structure of the investment

· Date of agreement

· Signature of parties

· How much the investor provides

· The form of investment

· When the investment will be transferred

· Witnesses to attest transaction

Most investments are provided in check, cash or bank transfer. Some investments can be tangible assets and the contract should state this.

Return on Investment

The contract should state when an investor should expect a return on investment, if he or she doesn’t receive a return, the investor can ask that you return the investment.

Shall the investment be paid; flat interest or do you both agree to the rate of returns based on the investment success.

What happens if the company is dissolved or enters into bankruptcy? What will happen to the investment in these circumstances?

Any risk associated with the investment need to be disclosed in the contract as well, this makes the investor aware that a return isn’t guaranteed.

REPORTING AND CONTROL

The contract should specify if the investor will have any rights within the company, such as control or management rights e.g. some investors may receive voting rights on a company that allows them to have a say in the management of the business investors may be allowed to vote for executives or directors.

In a smaller company, an investor maybe given rights that allow him to control the day to day operation.

The investment contract should specify any type of reports investors may expect to receive in relation to the company finances .It should also detail any rights the investors has to audit company books.

Contract Strategy

Investment contracts are very complex financial instruments, as with any investment they’re not risk free.

Anyone familiar with investing knows the complexity and that it’s not a guaranteed process because investment contracts can be very complicated you may consider consulting a lawyer for assistance.

If you need assistance entering into an investment contract, do not hesitate to contact us.

case study;Angel or seed investor agreement

other types of Investors:

Venture capitalist

Personal investors

Activist investors ETC

By Barrister Fru Shella.

To listen to the audio formhttps://anchor.fm/femalelawyershub/episodes/Investment-contractsall-you-need-to-know-eqopcs