Interim Investors Agreement Definition: Understanding What It Means

When companies seek funding from investors, they often sign an interim investors agreement. This contract serves as a temporary agreement between the investors and the company until a final agreement is reached.

But what exactly is an interim investors agreement? Let’s dive deeper into its definition and purpose.

What is an Interim Investors Agreement?

An interim investors agreement, also known as an interim term sheet, is a contract that outlines the terms of an investment before a final agreement is made. This contract helps to set expectations and protect the interests of both the investors and the company seeking funding.

The interim investors agreement typically includes information about the amount of investment, the equity or debt being offered, the conditions for the investment, and any other important details that need to be agreed upon before the investment is finalized.

Why is an Interim Investors Agreement Important?

Interim investors agreements are important because they help to establish trust and transparency between the investors and the company seeking funding. By outlining the terms beforehand, both parties are able to negotiate and agree on the details of the investment, which helps to minimize any potential misunderstandings or conflicts in the future.

Another benefit of interim investors agreements is that they provide a framework for due diligence. Since the terms of the investment are clearly outlined, it makes it easier for investors to assess the risks and opportunities associated with the investment.

What are the Common Terms Included in an Interim Investors Agreement?

While the specific terms included in an interim investors agreement can vary depending on the nature of the investment, there are several common terms that are typically included:

1. The amount of investment: This outlines the total amount of money that the investors are willing to invest in the company.

2. Equity or debt: This refers to whether the investment is in the form of equity or debt. If it is equity, the investors will become part owners of the company. If it is debt, the company will be required to pay back the investment with interest.

3. Conditions: This outlines any conditions that the company needs to meet before the investment is made, such as reaching a certain revenue target or hiring a new CEO.

4. Dilution protection: This is a clause that protects the investors from their ownership stake being diluted in the future, such as if the company issues new shares of stock.

Conclusion

In summary, an interim investors agreement is a temporary contract that outlines the terms of an investment between investors and a company seeking funding. It is an important document that helps to establish trust and transparency between the parties, and provides a framework for due diligence. By understanding the definition and purpose of an interim investors agreement, companies and investors can better negotiate and execute successful investments.