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Home Q&A Forum Can an angel investor agreement include provisions for the investor to have decision-making power in the company?
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Angel Investor

Investor Agreement

California

Asked on Nov 2, 2024

Can an angel investor agreement include provisions for the investor to have decision-making power in the company?

I am in the process of securing funding for my startup from an angel investor, and I have been presented with an angel investor agreement. While reviewing the agreement, I noticed a provision that grants the investor decision-making power in certain areas of the company's operations. I am unsure whether it is common or advisable for angel investor agreements to include such provisions, and I would like to understand the implications and potential risks associated with this before proceeding with the agreement.

1 Attorney answer

Answer

Angel Investor

California

Answered 17 days ago

Dolan W.

ContractsCounsel verified

Business Lawyer
Licensed in California
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5.0 (61)
Member Since:
September 8, 2024

Hello! Welcome to the site. My name is Dolan and I’m skilled in this area. It’s not uncommon that an investor wants some decision-making authority. However, this authority is usually governed by: 1. The amount of the investment. The more money they put on, the more control they will seek out over the other owners. 2. The types of decisions are also considered. Major decisions such as selling major assets, dissolving the company, or moving operations should include the investors. Day-to-day decision-making is not entirely uncommon, but it is a little unusual because many investors have too much going on to manage these decisions. So what to do? Have a lawyer look at the contract. In the interim, try to figure out why they went control and consider that decisions you can pawn off on them or which decisions they may be better equipped to handle. Thanks so much and best of luck! Dolan

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