Pro-rata side letter to Investment agreement Template for Ireland

A Pro-rata side letter to Investment agreement gives existing investors the right to maintain their ownership percentage in future funding rounds under Irish company law. When a company raises new capital, these letters ensure investors can buy additional shares to avoid dilution of their stake.

These side letters are particularly important for early-stage Irish startups and scale-ups, where multiple funding rounds are common. They protect investor interests while giving companies flexibility in raising capital. The terms typically outline the notice period for new offerings, subscription procedures, and any exceptions to the pro-rata rights, aligning with Ireland's Companies Act 2014.

Use a Pro-rata side letter to Investment agreement when structuring early investment rounds in Irish companies, especially if you're bringing in multiple investors who want to protect their future ownership stakes. This document becomes essential before closing your first significant funding round, as it sets clear expectations about participation rights in subsequent fundraising.

The timing is particularly critical for high-growth Irish startups planning multiple funding rounds. Having these letters in place helps avoid disputes during future capital raises and makes your company more attractive to professional investors. It's most valuable when you expect rapid scaling and need to maintain positive relationships with early backers while keeping fundraising options open.

• Full Pro-rata Rights: Grants investors the right to participate in all future funding rounds, maintaining their exact ownership percentage. Common in venture capital deals.
• Limited Pro-rata Rights: Restricts participation to specific future rounds or caps the investment amount. Typically used for angel investors or smaller stakeholders.
• Qualified Pro-rata Rights: Includes conditions like minimum ownership thresholds or good leaver provisions under Irish law before rights can be exercised.
• Time-bound Pro-rata Rights: Sets expiration dates or limits the number of future rounds where rights apply. Popular with strategic investors.

• Venture Capital Firms: Primary beneficiaries who request pro-rata rights to protect their investment positions in Irish startups during future funding rounds.
• Angel Investors: Early-stage investors who use these letters to maintain their ownership stakes as companies grow and raise additional capital.
• Company Directors: Responsible for negotiating and implementing pro-rata rights within the broader investment framework.
• Corporate Lawyers: Draft and review the letters to ensure compliance with Irish company law and alignment with existing shareholder agreements.
• Company Secretaries: Manage the documentation and ensure proper execution of pro-rata rights during subsequent fundraising.

• Investment Details: Gather current shareholding percentages, investment amounts, and company valuation figures.
• Notice Requirements: Define how and when investors must be notified of new funding rounds under Irish company law.
• Participation Terms: Specify timeframes for exercising pro-rata rights and any minimum investment thresholds.
• Existing Agreements: Review shareholders' agreement and articles of association to ensure alignment.
• Future Planning: Consider anticipated funding rounds and growth trajectory to set appropriate duration and conditions.
• Documentation: Use our platform to generate a legally sound pro-rata side letter that includes all required elements under Irish law.

• Parties and Definitions: Clear identification of the investor, company, and key terms under Irish law.
• Pro-rata Rights Scope: Detailed description of participation rights, including calculation methods and exceptions.
• Notice Provisions: Specific timeframes and procedures for notifying investors of new funding rounds.
• Exercise Mechanics: Process and deadlines for exercising pro-rata rights.
• Duration and Termination: Clear terms for how long rights remain valid and circumstances for expiration.
• Governing Law: Explicit reference to Irish law and jurisdiction.
• Integration Clause: Statement of relationship with main investment agreement and other documents.

A Pro-rata side letter to Investment agreement differs significantly from a standard Investment Agreement in both scope and purpose. While they're often used together in Irish funding rounds, they serve distinct functions.

• Scope of Coverage: Pro-rata side letters focus specifically on future investment rights, while Investment Agreements cover the entire investment relationship, including valuation, share class, and voting rights.
• Timing and Duration: Side letters typically look forward to future rounds, while Investment Agreements govern the current investment transaction.
• Flexibility: Pro-rata side letters can be easily modified or terminated without affecting the main investment terms, offering more adaptability for changing circumstances.
• Legal Standing: Under Irish law, side letters supplement the main Investment Agreement but don't replace or override its core provisions unless explicitly stated.