However, if your investor is expected to hold a minority interest and/or does not participate in a hands-on (i.e. often active) stake with the company in which he or she is investing, it is likely that he will seek an item of the agreed investment documentation to protect his interests. As the founder of the company – you want their money, so that you are presented with a “Take it or leave it” proposal. The worst thing you can do in such a situation – is simply accept the terms offered, especially if you don`t have to look at them in detail (in order to know what you agree). Investment documents generally include (i) the statutes and (ii) an agreement (often variously described by a combination of the terms “investment,” “subscription” and/or “shareholders` pact”). 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. After agreeing that the investor may have legitimate reasons for requesting appropriate documents, the objective of interested parties should be to establish and regulate documents effectively and at a lower cost.
Legal documents (in the author`s opinion) should be prepared on the basis of fairness and fairness. Other provisions may seem unfair at first glance, but with appropriate revisions and careful wording, you can accept them. In this type of provisions could fall the famous “leaver-dispositions”, according to which if a founder would leave the company at some point in the future, your shares will be able to acquire again from the company, etc. The investor will want to know that you will continue to actively participate in the activity – and thus permanently protect your investments.