On the other hand, a shareholder contract protects the rights of existing shareholders, unlike new parties who wish to acquire ownership of the company, as described in an investment agreement. Although the specific conditions established under a shareholders` pact depend on the specific interests of the shareholders, typical provisions apply: guarantees are taken by the guarantors, who are usually the founders and the company, that certain statements concerning the company are true and true at the time of completion. Although the investor has performed due diligence for the company and, according to common law, has the right to sue the founders for misrepresentation if the information provided was inaccurate, the investor will prefer to explicitly include such statements in the contract. If the investment in a life sciences company is realized, with the exception of IP guarantees, the remaining guarantees in their application will be quite limited due to the company`s limited business history. IP guarantees in life sciences investments, regardless of the phase of the business, are, in most cases, more detailed and important than others, because of the value, breadth and complexity of the IP they own or the products they want to create and/or develop. Guarantees are likely to be even more important if a life sciences company goes through a second or second investment cycle. The investment agreement stipulates that the proceeds of the investment must be used for specific purposes, such as the development of specific products or the implementation of the agreed business plan or budget. It is typical that the closing conditions are linked to each subsequent investment tranche. This often implies that a single exception, exclusively available for investment agreements, is part of investor rights, which can be accelerated by the implementation of an investor rights agreement negotiated between a venture capitalist and members of a company. Among the many contracts and agreements that are available for all sizes and development, investment agreements and shareholder agreements remain two of the most useful, as they accelerate the process of transformation of the exercise or lack of proper power by shareholders and, more importantly, set the investment conditions for new partners.
While an investment agreement establishes a contract for people wishing to acquire owners in a company, a shareholders` pact defines the rights of a new shareholder to the company.