FREE 10+ General Investment Contract Samples in MS Word | Google Docs | Apple Pages | PDF

Any new business that receives investment is overjoyed. Finding the right investor usually takes a lot of time and effort. When you do, it’s critical to have an investment contract in place that protects everyone’s interests. The investor will want to know that his money is safe, and the company will want to know that the funds are delivered quickly and that the founders’ stake in the company is secure.

10+ General Investment Contract Samples

An investment contract is a legal agreement between two parties in which one invests money with the expectation of receiving a profit. The Securities Act of 1933 governs investment contracts. A contract must contain the following elements, as laid out by the Howey test, to be considered valid in this category:

– A financial investment
– A cooperative venture
– Profit projections (s)
– Occurred as a result of the efforts of others

Although the Howey Test is not the only method for determining whether an investment contract meets the criteria for security, it is the most widely used.

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Types of Investment Contracts

1. Stock Purchase Agreement – This is one of the simplest contracts, but it requires a lot of documentation because it is for non-publicly traded investments.
2. Non-statutory Stock Option Agreement – Also known as nonqualified stock options, this type of contract is used when investors or employees of a company want to invest.
3. Statutory Stock Option Agreement – Also referred to as “incentive” or “qualified” stock options, this type of contract is governed by the Internal Revenue Code. Even though there are stringent requirements for this option, the tax advantages make it worthwhile.
4. Convertible Debt Agreement – This type of contract is known for its ingenuity in allowing an investor to lend money to a company and either be repaid later or gain an ownership interest in the company.
5. A convertible note – is a short-term debt instrument that can be converted into stock in the issuing company. An investor in this case lends money in exchange for stock.
6. Convertible Promissory Note – Depending on the terms of the agreement, this note converts debt to equity at a specific point in time.
7. A SAFE note –  is convertible security that acts as an option by allowing an investor to buy shares at a future price. This isn’t a real debt, and it doesn’t have any interest attached to it.
8. Restricted Stock Agreement – A restricted stock agreement prevents an investor from acquiring an ownership interest in a company. This type of investor is expected to devote time and effort to maintaining current interest.
9. Deferred Compensation – While not an outright investment, employees are considered to be investing in this category because ownership or pay increases are expected in the future.
10. Royalty, Commission, or Percentage of Revenue – This type of contract is for people who don’t want to own the company but want to invest in its profits or products instead.

It’s critical to spell out exactly what you’ll be providing as an investor and in what form, as well as when the investment will be activated, in the contract. It should be stated whether investments will be transferred in the form of cash, check, assets, or wire transactions. It is critical to include all specifics in the contract, no matter how minor they may appear, in order to avoid future confusion or disputes.

FAQs

The contract must be signed by both parties in the presence of two witnesses. The contract must be signed by each witness. One of the witnesses should ideally be a Notary Public who can notarize the signatures, but this is not required. Sign two copies of the contract, one for each party to keep and the other for their records.