An Investors’ Rights Startup Founder Agreement Template India online is a complex legal document outlining the rights and responsibilities of investors when purchasing a company’s stock or other involving securities. Investors’ Rights Agreements can cover several different rights awarded to the investors, depending on the agreement between the two parties. Almost always although the agreement will cover three basic investors’ rights: Registration rights, Information Rights, and Rights of First Rejection.
Registration Rights are contractual rights of holders of securities to have the transfer of those securities registered with the SEC under the Securities Act of 1933. In other words, Registration Rights entitle investors to force a company to register shares of common stock issuable upon conversion of preferred stock with the Securities and Exchange Commission. A venture capitalist shareholder especially wants the ability to register his shares because registration provides it with the right to freely sell the shares without complying with the restrictions of Rule 144.
In any solid Investors’ Rights Agreement, the investors will also secure a promise from the company which they will maintain “true books and records of account” in a system of accounting based on accepted accounting systems. The company also must covenant that anytime the end of each fiscal year it will furnish every single stockholder an equilibrium sheet of this company, revealing the financials of the company such as gross revenue, losses, profit, and salary. The company will also provide, in advance, an annual budget for every year including a financial report after each fiscal quarter.
Finally, the investors will almost always want to have a right of first refusal in the Agreement. This means that each major investor shall have the right to purchase a pro rata share of any new offering of equity securities by the company. This means that the company must records notice on the shareholders from the equity offering, and permit each shareholder a degree of with regard to you exercise their specific right. Generally, 120 days is given. If after 120 days the shareholder does not exercise his or her right, than the company shall have the option to sell the stock to other parties. The Agreement should also address whether or even otherwise the shareholders have a right to transfer these rights of first refusal.
There as well special rights usually awarded to large venture capitalist investors, including right to elect some form of of the company’s directors and also the right to participate in manage of any shares made by the founders of the particular (a so-called “co-sale” right). Yet generally speaking, the main rights embodied in an Investors’ Rights Agreement are the right to register one’s stock with the SEC, proper way to receive information in the company on the consistent basis, and good to purchase stock in any new issuance.