In InvestNext, you are able to set up your legal documents as e-signature documents (or templates) and add them to your Capital Raise so that your investors can efficiently sign their legal documents for the investment.
Below are some best practices to keep in mind while you work with your attorney to complete your legal documents, and when setting up your e-signature documents.
How long does creating legal documents take with an attorney?
Often, legal documents require several weeks to prepare and complete. We typically see sponsors/managers will have several rounds of review with the attorney to ensure the documents are correct and ready for your prospective investors to review and sign.
Do the documents accurately reflect the waterfall or payment structure?
Carefully review your legal documents waterfall or payment structure in your documents to be sure your legal documents accurately reflect the waterfall or payment structure you will be using to compensate your investors.
Is the project/deal correctly identified in all places in your legal document?
When reviewing your legal documents, make sure the documents correctly identify your project/deal by name in all places throughout the document. Often, the project name will appear in multiple locations. Review all the locations to ensure that the document does not need to be updated after it is already in use.
Check the document’s spacing between lines and the length of fields
When setting up the e-signature documents, you may quickly realize that the spacing between lines in the documents is too close and requires the investor to add the information in a tiny font or you must creatively add additional fields to accommodate.
Ensure you can add the fields into the document with enough space before or after the line(s) to allow for a standard font or signature size.
NOTE: Fields (or lines) for names and other information the investor must type in need to be long enough to accommodate the information. We often see lines and fields that are far too short to accommodate the investor’s name or company name.
Are there sections in the legal documents which state that additional documents must be provided to the manager?
If there are sections in your legal documents asking your investor to provide additional documents, etc., determine how your investors can provide those documents to you or if these documents are required as part of the Commitment process.
An investor will not be able to upload a document during their Commitment process like they could if they were signing the documents by hand and sending them back via mail. Investors can upload documents to the portal for your use - before or after they have completed their commitment.
NOTE: The investor can upload accreditation certificates requested during the Commitment process during the commitment process.
Is banking information requested in the legal documents?
InvestNext requires the investor to add their own banking information directly into the platform. If you request your investors to fill out their banking information in their documents, your investors will still have to add their banking information to the platform.
While there are times that you may need to send funds outside of InvestNext to your investor, most of the time, the banking information in the document will need to be reverified before you will use it. Consider if this item needs to be in the document.
Best Practices for working with your InvestNext portal and e-signature documents
Most legal documents have individual fields based on the type of entity that your investor will use to invest.
For example:
If an investor invests as an individual, there are fields in the legal documents that only an individual investor would fill out. Likewise, if an investor is investing as a business entity, there will be fields in the legal documents that are specific to the business entity that the investor must fill out.
If the investor invests with a partner or spouse, there should be fields for that partner or spouse to sign and date the documents. The spouse or partner should also have fields to add their tax ID (if needed) and any other contact information, as it may differ from the investor’s information.
Manager’s Countersigning the Documents
In InvestNext, only one manager or sponsor can countersign the investor’s legal documents to accept the investor as part of this investment.
If you have multiple managers who need to countersign the legal documents, designate one manager as the person to countersign the documents. Then have the other manager(s) sign the legal document before you add them to the e-signature templates.