An Investors’ Rights Agreement (IRA) is a legal document that outlines the rights and obligations of investors in a company. Typically, IRAs are entered into between a company and its investors (including venture capitalists, angel investors, and other equity holders) at the time of a financing round.
The purpose of an IRA is to provide investors with certain rights, such as the right to receive financial and other information about the company, the right to participate in future financings, and the right to approve certain actions taken by the company (such as mergers, acquisitions, and changes to the company’s articles of incorporation), as well as registration rights.
IRAs are often used to protect the interests of investors in early-stage companies, where the investors may have relatively little control over the company’s operations. By negotiating the terms of an IRA, investors can ensure that they have a say in the company’s future direction and are kept informed about important developments.
The specific terms of an IRA can vary widely depending on the negotiating power of the parties involved and the particular circumstances of the financing round. However, typical provisions may include drag-along rights, tag-along rights, preemptive rights, and various information rights.