An investment agreement (commonly called a stock purchase agreement) is a legal document between an investor and a company that outlines the terms of the investor’s investment, as well as the rights and obligations of the investor and those of the company. Conversely, a stockholders’ agreement is a legal contract that outlines the relationship between and among a company and its stockholders. As a life sciences or other technology startup, you will likely need both contracts to ensure a seamless relationship with your key stakeholders, including investors receiving shares of stock for their financial contributions.
Crowley Law LLC understands the key roles that stockholders’ agreements and investment agreements play in business success. That is why we have dedicated extensive resources to assist life sciences and other technology startups in drafting, enforcing and updating the contracts.
Thoughtful negotiations are crucial for concluding investment agreements to secure adequate funds and support long-term business operations. You may also need to negotiate stockholders’ agreements for collaborations, partnerships and joint ventures. In this case, the negotiations will help define how decisions will be made, how the business will be managed and how disputes will be resolved. Crowley Law LLC recommends focusing on the following considerations during your negotiations, as well as others you identify with your legal counsel:
You should determine your business’s current market value before commencing any negotiations. An accurate and well-supported valuation will grant you the leverage to discuss investment terms and equity stakes confidently. You must understand the valuation methods used in your industry and leverage them to justify your company’s worth to investors and potential partners.
You should also be familiar with the common terms and conditions used in investment agreements with respect to your industry. This will help not only strengthen your negotiating power but also set realistic expectations and determine benchmarks to assess offers. In most cases, you will need to research what similar enterprises in your industries have agreed to in these types of agreements.
Each term in an agreement can have a substantive impact on your enterprise’s future operations and profits. You should particularly focus on terms related to financial commitments, exit strategies and stockholders’ rights due to their significant impact on operational freedom and business growth. You should also anticipate future events, such as potential acquisitions and management structure changes, to help negotiate terms aligned with your long-term business strategy.
When negotiating investment agreements, you should consider competing offers from different investors when possible. You should transparently communicate interest from other investors to build competition and a sense of urgency so long as this does not violate any confidentiality obligations you may have. This can help strengthen your negotiating position, increasing the probability of obtaining more favorable terms for your business.
Negotiating stockholders’ agreements and investment agreements should not be solely transactional. Investors and other stockholders will be involved in the business for a significant period, so you should focus on building long-term relationships with your investors, stockholders, vendors and other collaborators. In particular, you should prioritize mutual respect, transparency and open communication during negotiations. This will help you establish a positive environment for ongoing collaboration.
Legal and financial advice is invaluable when negotiating these types of agreements. It can help clarify the implications of terms being negotiated and navigate the complexities of typical agreements. An experienced legal counsel can also help to ensure that your agreements comply with relevant laws and protect your interests by identifying and mitigating potential risks, where possible.
The process of negotiating stockholders’ and investment agreements can be overly challenging. Here are some of our pertinent services:
We draft and review investment agreements and stockholders’ agreements to focus on making them clear, legally sound and reflect our clients’ interests. We also help renegotiate and amend stockholders’ agreements to reflect new realities.
We help define the roles, responsibilities and authority of all parties involved in an agreement. This ensures clarity and minimizes the prospects for serious disagreements on key terms.
We negotiate on behalf of our clients to seek to secure favorable terms in investment agreements and stockholders’ agreements.
We perform in-depth analyses to identify potential risks in investment agreements and stockholders’ agreements and propose appropriate mitigation.
We assist with the due diligence process when negotiating investment agreements. We help our clients ensure that all necessary disclosures are made and that the contract reflects the true financial and operational State of the affected startup.
We ensure that all agreements with investors and stockholders comply with applicable laws and government regulations. We also provide advice on best practices in corporate governance to make investing in the client more attractive from the investor’s perspective.
Governance and investment agreements often include provisions for resolving disputes between founders, investors and management. We help negotiate these provisions, ensuring that they are effective and minimize disruption to the startup.
There are several factors you should consider to protect your enterprise’s interests. These include:
Yes, a logo can be considered an IP due to its symbolic significance to a company.
There are many things you cannot patent, including a mathematical formula, a law of nature, a scientific principle with no functional application or a naturally occurring substance. Also, you may not claim patent protection for an idea that is publicly known or disclosed publicly before you file a patent application. Consult Crowley Law LLC to determine whether your assets are protectable under some legal regime.
An Employment Agreement is a legally binding contract between an employer and an employee that outlines the terms and conditions of employment. This document establishes the rights and obligations of both parties and typically covers various aspects of the employment relationship. For example, it could expressly grant the employer ownership of any IP that the employee develops during the course of their employment.
No, employment agreements do not have to be in writing to be binding on many legal issues. However, we strongly recommend having written agreements to avoid misunderstandings and disputes.
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