An Investors' Rights Agreement 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 though 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 credit repair professional 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 ability 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 coming from a company which they will maintain "true books and records of account" within a system of accounting in keeping with accepted accounting systems. Supplier also must covenant anytime the end of each fiscal year it will furnish each stockholder a balance sheet of this company, revealing the financials of an additional such as gross revenue, losses, profit, and monetary. The company will also provide, in advance, an annual budget for everybody year and a financial report after each fiscal three months.
Finally, the investors will almost always want to have a right of first refusal in the Agreement. Which means that each major investor shall have the ability to purchase an experienced guitarist rata share of any new offering of equity securities together with company. This means that the company must provide ample notice to the shareholders from the equity offering, and permit each shareholder a fair bit of time to exercise any right. Generally, 120 days is given. If after 120 days the shareholder does not exercise your right, n comparison to the company shall have picking to sell the stock to other parties. The Agreement should also address whether not really the shareholders have a right to transfer these rights of first refusal.
There are also special rights usually awarded to large venture capitalist investors, similar to the right to elect several of the company's directors along with the right to sign up in manage of any shares expressed by the founders equity agreement template India Online of the particular (a so-called "co-sale" right). Yet generally speaking, keep in mind rights embodied in an Investors' Rights Agreement are the right to join up one's stock with the SEC, the right to receive information at the company on a consistent basis, and obtaining to purchase stock any kind of new issuance.