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Investment Agreement Vs Shareholders Agreement

In a share subscription agreement, it is said that the investor in exchange for an agreed investment amount has subscribed shares in the company. Then the company will issue these agreed shares to the investor. In most cases, investors probably have to require life sciences companies to have the right to appoint a director and for a majority, if not all, of the directors appointed by the investors to be present so that there will be a quorum for each board meeting, so that business can continue. An investor director can bring his know-how and know-how to the sector. Founders may also have a strong right to appoint a director. In some cases, investors may seek “compliance rights,” so they have the right to send non-directors to attend board meetings and obtain board documents, but no votes. While board representation can be expected, it can be difficult for a company to have gone through several investment cycles and new institutions to bring together new board members at each turn. An investment agreement and a shareholders` pact are two often confusing legal documents, often used by large and small businesses. The distinction between the two allows you to fully integrate the investment efforts of new shareholders and consolidate the ownership rights of your company. Since the investment agreement deals with the underwriting of shares by investors in return for investment funds, the investment agreement should engage all participating investors, including all segregated funds that invest. After an investment tranche, the company can provide an investment guarantee as an explicit guarantee that the guarantor`s statements on the completion date are accurate and correct.

Representations and guarantees generally refer to the company`s terms and conditions, which are reviewed as part of due diligence. These may relate to the financial situation (accounting and tax representations), the company`s assets (ownership and valuation), the ownership structure, the operational characteristics and the legal situation of the company. Shareholder agreements establish additional obligations between shareholders themselves and complement articles with a deeper organization of shareholder relations.

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