Legal Terms
Summary of Key Legal Terms
1. Introduction
The key documents governing the Investment:
- Investment Agreement
- Articles of Association
- Disclosure Letter
Documentation is in a standard form
2. Investment Agreement
(This document governs the terms of the investment)
The Board
- NEEM will have the right to appoint an observer to attend board meetings (ordinarily the NEEM Fund Manager or Portfolio Executive).
Warranties
- What are they?
Statements made by the Managers and/or Existing Shareholders about the Company, themselves and the preparation of the business plan and information supplied to the Investors.
- Limitations on liability under the warranties
Warranties are subject to anything the warrantors tell the Investors in the Disclosure Letter.
Any person giving warranties will not be liable for a breach of warranties if they have made due and careful enquiry UNLESS that person has been fraudulent, dishonest or has wilfully concealed something from the Investors.
- Conduct of the Company
Consent will be required from NEEMF before the Company can make significant decisions or changes to its share structure or changes to its plans from those in agreed budgets.
Positive obligations on Company include to:-
- Appoint auditors and produce accounts.
- Keep Managers' emoluments to an agreed level.
- Provision of Information to NEEMF
To include:-
Audited accounts - within 4 months of year end.
Management accounts - within 21 days of month end.
Details of any offer to purchase the Company or its business.
Anything else reasonably requested.
3. Articles of Association
(This document governs the rights of the Shareholders)
Share Rights
- NEEMF shares to rank pari passu with those of any co-investor(s) in respect of income, return of capital and voting.
- Payment of dividends subject to NEEMF’s consent.
- New issues of shares to be offered to all shareholders pro-rata to holdings.
Permitted Transfers of Shares
- To a spouse, lineal descendant or family trust.
- Transfers approved by all shareholders.
Pre-Emption Rights
- All shares sold (other than through a drag along, tag along, permitted transfer) must be offered to all other shareholders pro-rata to their holdings of shares in the Company before being sold to a third party.
- Disputes on market value to be determined by an independent expert.
Tag Along
- No third party can obtain a controlling interest in the Company without offering to buy out all other shareholders for the consideration per share (in cash or otherwise) offered to other shareholders.
4.Service Agreement
(This document formally records the terms of employment of the Managers)
The Managers may be expected to enter into new service agreements.
5. Disclosure Letter
Enables Managers to provide information where they consider the warranties to be untrue or misleading.