When your company raises capital, you will need to create a variety of legal documents to support and ensure the process runs smoothly. An agreement letter is one of the most important contracts you will sign during the fundraising round.
A contract between the investor and the company is known as an investment agreement letter. The letter will outline the main contractual terms and conditions under which the investor will acquire ownership of your company.
This is not to be confused with a shareholder agreement, which is a contract between a company and its shareholders that governs how the shareholders’ rights and obligations are to be exercised.
This article will explain what an agreement letter for investment is, how to write one, as well as writing tips, an example, and a template.
What Is An Agreement Letter For Investment?
An Investment Agreement Letter is a contract that establishes the terms and conditions of a financial investment. The agreement’s parties could be two business partners, a client, a company, or a government body. Any new business will benefit from an investment.
When planning a contract, it is essential to have an investment contract that represents the interests of all parties involved. The investor is always looking for assurances that his investment is secure. In general, this letter specifies the amount of investment and the investor’s rights in the project.
Why Is It Important?
Investment agreements are essential for two reasons:
- To begin, investment transactions, like any other, involve numerous risks for both the investor and the company. To protect their interests, the parties must effectively manage these risks.
- Second, it aids in outlining the parties’ rights and obligations in a variety of situations. An investment agreement letter may specify what should be done if the parties disagree. This means that if the relationship between the company and the investor becomes strained, both parties are aware of their rights.
Tips For Writing This Letter
Here is a guide that you can use to write your own letter:
- Write the sender’s name, address, and contact information first, followed by the receiver’s information.
- Mention the company’s name and address. Write the current date beneath these specifics.
- List all of the agreement’s documents, including the amount of money to be invested, how the investment will be used, and what the investor can expect in exchange for their financial contribution.
- Disclose the term that identifies the duration of the agreement’s validity.
- Mention the investment contract’s termination clause.
- Proofread each document and print two copies.
- Sign both copies of the letter so that each party has a copy for their records.
Sample and Template
We provide an example and template to help you in constructing your own investment agreement letter.
Agreement Letter for Investment Template
[City, ZIP Code]
[City, ZIP Code]
Dear [Recipient’s Name],
I am writing to you in response to your organization’s request for investment in your manufacturing company. I’d like to inform you that our board of directors has decided to go further and invest in your organization, subject to certain terms and conditions that your organization must follow.
The investment agreement was written in accordance with the investment laws of the City of London. According to the agreement, we agree to invest [$ amount], half of which will be paid in advance before the agreement’s effective date. We anticipate a two-percentage-point annual profit on our investment. Aside from that, our organization would receive a portion of the profit.
I’ve included the agreement with the letter. Please read it carefully and, if you agree to all of the terms and conditions, sign and mail it to us. If you have any questions, please contact the undersigned at [000-000-000].
Agreement Letter for Investment Example
Hawks Groups of Companies
26 Hackney Road
London, UK 3478
December 14, 2022
Farrell Manufacturing Company
56 Snowy Hill Road
London, UK 7893
Subject: Agreement Letter for Investment
Dear Mr. Farrell,
I am writing to you in response to your company’s request for investment in your manufacturing business. I’d like to inform you that our board of directors has decided to go further and engage in your organization, subject to certain terms and conditions that your organization must follow.
The investment agreement was written in accordance with London’s investment laws. According to the agreement, we agree to invest $20,000, fifty percent of which will be paid in advance before the agreement’s effective date. We anticipate a 2% annual return on investment. Aside from that, our organization would receive a portion of the profits.
I’ve included the agreement with the letter. Please read it carefully and, if you agree to all of the terms and conditions, sign and mail it to us. If you have any questions, please contact the undersigned at (431) 987 0034.
With warm regards,
- An investment agreement letter is a contract between the investor and the company.
- It is crucial to have an investment contract that embodies the interests of all parties involved when planning a contract.
- List all of the documents associated with the agreement, including the amount of money to be invested, how the investment will be used, and what the investor can assume in exchange for their financial commitment.
- Proofread and review your letter before sending it to the right recipient.