STEPS TO CREATE A LEGALLY BINDING INVESTMENT AGREEMENT IN CAMEROON
Where an investor such as a venture capital firm or even an existing investor is proposing to inject new capital into your business, they will likely require you to sign a contract known as an investment agreement. The steps to create a legally binding investment agreement in Cameroon are spelled out in the Cameroon business investment code.
The importance of an investment agreement in Cameroon business partnerships is that it sets out the key elements of an investment agreement in Cameroon such as:
- The identity of the company and the investors
- The amount being invested
- Any conditions on which the investment is being made
- Whether there are any preconditions to the investment, for example, that shares will be issued in return for the investment
- Warranties are given by the investor and the company
- The precise terms of the investment agreement will depend on the type of funding being offered.
IMPORTANCE OF INVESTMENT AGREEMENT IN CAMEROON BUSINESS PARTNERSHIPS?
- When your company accepts new funding, both itself and your investors take on certain risks inherent in the transaction. An investment agreement in Cameroon helps both sides identify and manage these risks in a mutually acceptable way. This can be particularly important to start-up companies and companies going through early rounds of investment to ensure that all parties are clear on the terms of the investment, both now and in the future.
- An investment agreement in Cameroon creates legally binding arrangements that allocate risk and the rights and obligations of each party, including provisions that govern what to do in case of a dispute, or one side wants to exit from the investment arrangements.
- Investors that are going to be minority shareholders, in particular, will want to make sure the funds are used in the way envisaged, and that they have an adequate say in the company strategy.
- Ultimately, investors are seeking to make sure there’s a legally binding document that sets out how they will get a return on their investment.
TYPES OF INVESTMENT AGREEMENTS IN CAMEROON
The type and terms of your investment agreement(s) in Cameroon will depend on the type of funding being offered to your company. Here are the most common types of investment arrangements:
1. Share the purchase agreement
If your company is issuing shares as part of the investment, then you’ll enter into a share subscription agreement with your investor under which they agree to purchase shares in exchange for their investment.
2. Simple agreement for future equity
If your investor wants the right to subscribe for shares in the future, they may ask you to enter into a simple agreement for future equity or SAFE in return for providing funding.
WHAT ARE THE KEY ELEMENTS OF AN INVESTMENT AGREEMENT IN CAMEROON?
While each investment agreement in Cameroon is different, here are the main terms
- The identity of the parties
- Tranche payments
- Board representation
- Restrictive covenants
- Exit strategy
An investment contract is a special type of contract, therefore, to be valid, it must have all the essential terms.
Article by MAFANY victor NGANDO
“The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.”