Company and investment
Agreement for future equity
An instrument where an investor pays now in exchange for shares to be issued on a future event, without the money being a loan. There is no interest and usually no repayment date, which is what separates it from a convertible loan. Standard forms of this instrument were popularised in United States practice and equivalents exist elsewhere under different names; whether a particular form works in a given country depends on local company and tax law, so the version used is chosen for the place the company sits.
- In the catalogue
- Company and investment
- Where it can live
- Any of the 184 governing laws
Who uses one
- Early-stage companies raising before a priced round.
- Angel investors and funds investing at the earliest stage.
- Founders who want to take money without setting a valuation yet.
What you are deciding
- The amount, and when it is paid
- What event causes shares to be issued
- On what terms the shares are issued
- What happens if the company is sold first
- What happens if no qualifying event ever occurs
- Whether the investor has any rights in the meantime
- How it interacts with other instruments already outstanding
- Whether the local form is the right one for this company
Blanks you leave stay blank and wait in the room. Nothing is filled in from a guess.
The sections a draft usually has
- 1The parties and the payment
- 2The triggering event
- 3How shares are issued
- 4Sale of the company
- 5Dissolution
- 6Investor rights before issue
- 7Representations
- 8Transfer
- 9Governing law
A general outline, not a required one. What turns up in a draft follows what you described. A contract is written in the order a contract is read.
What people call it
The names this kind of paper goes by. They are here because people search for them. They also filter the catalogue. They are not a wordlist the door matches. At the composer you describe the deal in your own words instead.
- safe agreement
- simple agreement for future equity
- future equity agreement
- advance subscription agreement
- asa
- equity instrument early stage
Questions people ask
- Is this instrument available everywhere?
- Not in the same form. It was popularised in United States practice and other countries use their own equivalents, shaped by local company law. Ask a lawyer which form fits the company you have.
- How is it different from a convertible loan?
- It is generally not a debt: no interest, no repayment date, and no creditor ranking. That makes it simpler and gives the investor less to fall back on.
- What happens to it if the company is sold before any round?
- The instrument says — commonly a choice between getting the money back and converting at a stated basis. It is one of the terms worth reading before signing.
General answers about the document. Not advice about your situation. Not written about any one country.
Where it lives
A contract names the legal system it is governed by. That is a separate decision from which paper it is. You pick it at the door, from any of the 184 units in Governing law, including England and Wales, Delaware, California and New York.
You do not start from this page. Describe the deal in one sentence at the door. Read the draft back in plain language, in the order a contract is read.
Start it at the door →Related kinds