Investor clause: Copy, customize, and use instantly
Introduction
An investor clause outlines the rights, obligations, and terms relating to the relationship between an investor and the company, particularly regarding the investor's role, protections, and terms for exit or investment-related actions. It ensures clarity in managing expectations and securing the investor’s interests during the investment term.
Below are templates for investor clauses tailored to different scenarios. Copy, customize, and insert them into your agreement.
Standard investor clause
This version provides a basic agreement.
The [Investor] agrees to invest [X amount] in the [Company] in exchange for [Y]% equity. The [Investor] shall be entitled to receive [X]% of the profits, subject to any adjustments made according to the terms of this Agreement.
Investor clause with voting rights
This version includes voting rights for investors.
The [Investor] shall have the right to vote on key matters including, but not limited to, mergers, acquisitions, and changes to the capital structure of the [Company]. Each share of common stock shall entitle the [Investor] to one vote.
Investor clause with exit rights
This version includes exit rights for the investor.
The [Investor] shall have the right to exit the investment in the [Company] through a sale of shares, initial public offering (IPO), or merger/acquisition of the [Company] at the market value of the shares, subject to the terms set forth in this Agreement.
Investor clause with anti-dilution provisions
This version includes anti-dilution provisions.
The [Investor] shall have anti-dilution protection, ensuring that in the event of a down round or issuance of additional shares at a lower price, the [Investor]’s equity percentage will be adjusted to maintain their original investment value.
Investor clause with preferential treatment
This version includes preferential treatment.
In the event of liquidation or dissolution of the [Company], the [Investor] shall receive preferential treatment and be entitled to receive the full amount of their initial investment, plus any accrued dividends, before any distributions are made to common stockholders.
Investor clause with information rights
This version includes information rights for the investor.
The [Investor] shall have the right to receive quarterly financial statements, annual reports, and any other relevant financial or operational information related to the [Company], upon request.
Investor clause with right of first refusal
This version grants a right of first refusal to the investor.
The [Investor] shall have the right of first refusal to purchase additional shares in any future offering by the [Company], on a pro-rata basis, in order to maintain their ownership percentage.
Investor clause with board observation rights
This version grants board observation rights.
The [Investor] shall have the right to appoint an observer to attend all meetings of the Board of Directors, who shall have the right to receive meeting notices and materials but shall not have the right to vote.
Investor clause with preemptive rights
This version includes preemptive rights.
The [Investor] shall have the preemptive right to purchase additional shares issued by the [Company] in future capital raises, so as to maintain their proportional equity interest.
Investor clause with veto rights
This version includes veto rights.
The [Investor] shall have veto rights on any decisions that would materially affect the structure of the [Company], including but not limited to changes to the capital structure, the incurrence of debt, or the sale of significant assets.
Investor clause with exit strategy requirements
This version includes exit strategy requirements.
The [Company] agrees to develop and pursue an exit strategy that includes, at a minimum, the potential for an initial public offering (IPO), merger, or acquisition within [X] years of the investment date.
Investor clause with liquidation preference
This version includes a liquidation preference.
In the event of a liquidation, dissolution, or winding-up of the [Company], the [Investor] shall have a liquidation preference entitling them to receive an amount equal to their original investment before any distributions are made to common stockholders.
Investor clause with right to approve major transactions
This version grants approval rights for major transactions.
The [Investor] shall have the right to approve any major transactions involving the [Company], including mergers, acquisitions, and the sale of significant assets, as specified in this Agreement.
Investor clause with dividend rights
This version includes dividend rights.
The [Investor] shall be entitled to receive dividends on the common stock owned by the [Investor], at the discretion of the Board of Directors, based on the earnings of the [Company].
Investor clause with co-sale rights
This version includes co-sale rights.
In the event that the [Investor] or any stockholder sells their shares to a third party, the [Investor] shall have the right to sell a proportionate amount of shares alongside the selling stockholder under the same terms and conditions.
Investor clause with preferred stock conversion rights
This version includes conversion rights for preferred stock.
The [Investor] shall have the right to convert their preferred stock into common stock of the [Company] at any time, based on a conversion ratio determined by the Board of Directors.
Investor clause with voting agreement
This version includes a voting agreement.
The [Investor] agrees to vote their shares in favor of any proposal approved by a majority of the Board of Directors, including decisions related to the election of directors or approval of major corporate actions.
Investor clause with right to participate in future funding rounds
This version allows participation in future funding rounds.
The [Investor] shall have the right to participate in any future funding rounds on the same terms and conditions as other investors, to maintain their percentage ownership in the [Company].
Investor clause with exit upon breach of key terms
This version allows exit upon breach.
If the [Company] breaches any material term of this Agreement, including failure to meet agreed financial performance milestones, the [Investor] shall have the right to exit the investment and request a buyback of their shares at fair market value.
Investor clause with vesting of investor rights
This version includes vesting of investor rights.
The rights granted to the [Investor] under this Agreement, including the right to vote, receive dividends, and participate in capital raises, shall vest over a period of [X] years, with full rights vesting upon the occurrence of certain milestones.
Investor clause with right to approve budget
This version grants approval rights over the budget.
The [Investor] shall have the right to review and approve the annual operating budget of the [Company], including any capital expenditures or allocations over [X] amount, before the budget is finalized.
Investor clause with protective provisions
This version includes protective provisions.
The [Investor] shall have the right to approve any actions that would result in a material dilution of their ownership stake, including the issuance of new shares, options, or convertible securities, except in connection with an IPO.
Investor clause with buyout option
This version includes a buyout option.
The [Investor] shall have the right to sell their shares back to the [Company] at any time after [X] years from the date of investment, at a price determined by the Board of Directors based on the fair market value of the [Company].
Investor clause with tag-along rights
This version includes tag-along rights.
In the event that a majority shareholder sells their shares to a third party, the [Investor] shall have the right to sell their shares alongside the majority shareholder on the same terms and conditions, known as tag-along rights.
Investor clause with no competing investments
This version restricts competing investments.
The [Investor] agrees not to invest in or operate a business that directly competes with the [Company] for the duration of this Agreement and for [X] years thereafter, unless approved by the Board of Directors.
Investor clause with minimum investment threshold
This version includes a minimum investment threshold.
The [Investor] agrees to invest a minimum of [$X] in the [Company] in exchange for the rights and obligations outlined in this Agreement. Failure to meet this minimum investment will result in the termination of the investment.
Investor clause with pro-rata rights for future rounds
This version grants pro-rata rights for future rounds.
The [Investor] shall have pro-rata rights to participate in future funding rounds, allowing them to maintain their percentage ownership by purchasing additional shares in the [Company].
Investor clause with restrictions on selling shares
This version includes restrictions on selling shares.
The [Investor] agrees not to sell or transfer any shares of the [Company] within [X] years of the investment date, unless authorized by the [Company] or as part of a registered public offering.
Investor clause with independent director appointment
This version allows the appointment of an independent director.
The [Investor] shall have the right to appoint one independent director to the Board of Directors of the [Company], who will act in the best interests of all shareholders.
Investor clause with right to inspect company records
This version grants the right to inspect records.
The [Investor] shall have the right to inspect and copy the books, records, and financial statements of the [Company] upon reasonable request, to ensure transparency and accountability.
Investor clause with use of proceeds from investment
This version defines the use of proceeds.
The [Company] agrees to use the funds provided by the [Investor] for the following purposes: [list of purposes], and shall provide periodic reports to the [Investor] on the use of these funds.
Investor clause with right to exit via IPO
This version includes exit rights via IPO.
The [Investor] shall have the right to exit the investment in the event of an initial public offering (IPO) of the [Company], by selling their shares in the public market at the offering price, subject to any lock-up periods.
Investor clause with approval for capital allocation
This version includes approval for capital allocation.
The [Investor] shall have the right to approve any allocation of capital for investments or acquisitions above [X] amount, ensuring alignment with the [Investor]'s interests and the [Company]'s growth strategy.
Investor clause with right to request a buyback at set intervals
This version allows buybacks at set intervals.
The [Investor] may request a buyback of their shares by the [Company] at regular intervals, such as annually or semi-annually, at a price equal to the fair market value of the shares as of the buyback request date.
Investor clause with protection against dilution
This version provides protection against dilution.
The [Investor] shall be entitled to protection against dilution, ensuring that their percentage ownership in the [Company] remains the same, even if new shares are issued by the [Company].
Investor clause with no transfer of shares without approval
This version restricts share transfers.
The [Investor] agrees not to transfer or sell any shares of the [Company] to a third party without the prior written consent of the Board of Directors, which approval shall not be unreasonably withheld.
Investor clause with restrictions on competitor investments
This version restricts investments in competitors.
The [Investor] agrees not to invest in, or be involved with, any direct competitors of the [Company] for the duration of this Agreement, unless permitted by the Board of Directors.
Investor clause with right to exit via acquisition
This version allows exit via acquisition.
In the event of a merger or acquisition of the [Company], the [Investor] shall have the right to sell their shares to the acquiring entity at the same terms as the majority stockholders or at a price determined by the terms of the acquisition.
Investor clause with annual reporting requirements
This version includes annual reporting requirements.
The [Company] agrees to provide the [Investor] with annual reports detailing the financial condition of the company, including income statements, balance sheets, and cash flow statements, within [X] days after the end of the fiscal year.
Investor clause with right to receive future investment offers
This version grants rights to future investment offers.
The [Investor] shall have the right to receive and participate in future investment opportunities offered by the [Company] before the offer is made available to third-party investors.
Investor clause with non-compete agreement
This version includes a non-compete clause for investors.
The [Investor] agrees not to engage in any business that competes directly with the [Company] within [X] years after exiting the [Company], either through sale of shares or other methods of exit.
Investor clause with restriction on additional capital contributions
This version restricts additional capital contributions.
The [Investor] agrees not to make any further capital contributions to the [Company] beyond their initial investment without the prior written consent of the Board of Directors.
Investor clause with change of control provisions
This version includes provisions for a change of control.
In the event of a change of control of the [Company], the [Investor] shall have the right to exit the investment and sell their shares to the new controlling party or to the [Company] at a price determined by an independent valuation.
Investor clause with exit rights after [X] years
This version includes exit rights after a specified period.
After [X] years from the execution of this Agreement, the [Investor] shall have the right to exit the investment by selling their shares back to the [Company] or to a third party, subject to any restrictions on transfer outlined herein.
Investor clause with rights to participate in strategic decisions
This version grants rights to participate in strategic decisions.
The [Investor] shall have the right to participate in discussions concerning the [Company]'s major strategic decisions, including mergers, acquisitions, and entry into new markets, but shall not have a veto power over such decisions.
Investor clause with rights to influence corporate governance
This version includes governance rights for the investor.
The [Investor] shall have the right to influence the governance structure of the [Company] by nominating a director to the Board of Directors and providing input on the strategic direction of the [Company].
Investor clause with minimum return on investment guarantee
This version guarantees a minimum return on investment.
The [Company] agrees to guarantee a minimum return of [X]% on the [Investor]'s capital within [Y] years from the date of investment, or the [Investor] will have the right to exit the investment and receive the return of their principal investment.
Investor clause with preferential liquidation rights
This version includes preferential liquidation rights.
In the event of a liquidation or dissolution, the [Investor] shall receive their investment amount plus any accrued returns before any remaining proceeds are distributed to common stockholders.
Investor clause with right to enforce compliance
This version grants rights to enforce compliance.
The [Investor] shall have the right to take action to enforce compliance with the terms of this Agreement, including the right to seek remedies in court if the [Company] breaches its obligations under this Agreement.
Investor clause with automatic conversion of preferred shares
This version includes automatic conversion of preferred shares.
In the event of an initial public offering (IPO), the [Investor]'s preferred shares will automatically convert into common stock at a conversion rate of [X]:1, subject to the terms of the [Company]'s articles of incorporation.
Investor clause with right to request a stockholder vote
This version includes a right to request a vote.
The [Investor] shall have the right to request that the [Company] hold a stockholder vote on any matters of significant importance, including changes to the capital structure, corporate governance, or business operations.
Investor clause with restrictions on the issuance of new shares
This version restricts the issuance of new shares.
The [Company] agrees not to issue any new shares of stock that would dilute the [Investor]'s ownership stake by more than [X]% without obtaining the prior written consent of the [Investor].
Investor clause with guarantee of certain management rights
This version guarantees management rights.
The [Investor] shall have the right to appoint a certain number of members to the [Company]’s management team, including key positions such as CFO and COO, for the duration of their investment in the [Company].
Investor clause with limitations on share transfers
This version includes limitations on share transfers.
The [Investor] agrees not to transfer, sell, or otherwise dispose of their shares to a third party without the prior written consent of the [Company], except as permitted under the terms of this Agreement.
Investor clause with exit upon material adverse change
This version allows exit upon material adverse change.
If there is a material adverse change in the business, financial condition, or prospects of the [Company], the [Investor] shall have the right to exit the investment and demand a buyout of their shares at a price determined by an independent appraiser.
Investor clause with right to receive liquidation preference
This version includes liquidation preference.
In the event of a liquidation or sale of the [Company], the [Investor] shall receive a preferential distribution of proceeds, equal to their initial investment amount plus any accrued dividends, before any distributions are made to common stockholders.
Investor clause with right to approve annual budget
This version grants approval rights for the annual budget.
The [Investor] shall have the right to approve the annual operating budget of the [Company], including any capital expenditures, before it is finalized by the Board of Directors.
Investor clause with confidentiality obligations
This version includes confidentiality obligations.
The [Investor] agrees to maintain strict confidentiality regarding any non-public information received from the [Company], including financial statements, business strategies, and intellectual property, for the duration of this Agreement and for [X] years thereafter.
Investor clause with board approval for sale of shares
This version requires board approval for share sales.
The [Investor] agrees not to sell or transfer any of their shares without the prior approval of the Board of Directors, except in the case of an approved exit event, such as a merger or IPO.
Investor clause with commitment to additional funding
This version includes a commitment to provide additional funding.
The [Investor] agrees to commit additional funding to the [Company] up to a maximum amount of [$X], subject to the terms and conditions outlined in the future funding rounds.
Investor clause with right to approve new debt issuances
This version grants approval for new debt issuances.
The [Investor] shall have the right to approve any new debt issuance by the [Company] exceeding [$X], to ensure that the debt levels do not exceed the [Investor]'s tolerance for risk.
Investor clause with restrictions on acquisitions
This version restricts acquisitions.
The [Investor] agrees that the [Company] shall not engage in any acquisitions or mergers without the prior approval of the [Investor], unless the acquisition is valued under [$X].
Investor clause with rights to offer investment in follow-on rounds
This version includes rights to participate in follow-on rounds.
The [Investor] shall have the right to participate in follow-on rounds of funding on the same terms as new investors, to ensure their ownership percentage is maintained.
Investor clause with buyout provisions for minority investors
This version includes buyout provisions for minority investors.
In the event that the [Company] undergoes a merger or acquisition, the majority investors shall have the right to offer to buy out the shares of minority investors at the market value of the shares.
Investor clause with voting rights on major business decisions
This version grants voting rights for major business decisions.
The [Investor] shall have voting rights on major business decisions, including but not limited to, the sale of assets, changes in business strategy, and issuance of new shares of stock.
Investor clause with exit rights in case of default
This version includes exit rights in case of default.
If the [Company] defaults on any material terms of this Agreement, the [Investor] shall have the right to exit the investment and receive a repurchase of their shares at a price equal to the original purchase price.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.