{"id":60197,"date":"2023-11-22T10:22:37","date_gmt":"2023-11-22T01:22:37","guid":{"rendered":"https:\/\/monolith.law\/en\/?p=60197"},"modified":"2024-02-27T22:04:47","modified_gmt":"2024-02-27T13:04:47","slug":"investment-contract-additional-closing","status":"publish","type":"post","link":"https:\/\/monolith.law\/en\/general-corporate\/investment-contract-additional-closing","title":{"rendered":"Explaining 'Additional Closing' in Investment Contracts: Appropriate Methods and Contract Contents"},"content":{"rendered":"\n<p>Generally, various preparations are made towards the conclusion of an investment contract, such as negotiations on investment terms and due diligence.<\/p>\n\n\n\n<p>Once these preparations are completed, the investment contract is concluded.<\/p>\n\n\n\n<p>However, there may be cases where multiple investors are involved, and the timing of investment may differ for each investor.<\/p>\n\n\n\n<p>In such cases, there arises a need to conclude additional investment contracts with investors who have not yet concluded their contracts.<\/p>\n\n\n\n<p>Therefore, in this article, we will explain the points to be aware of in additional closings in investment contracts, targeting investors.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_53 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/monolith.law\/en\/general-corporate\/investment-contract-additional-closing\/#What_is_an_Investment_Contract\" title=\"What is an Investment Contract?\">What is an Investment Contract?<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/monolith.law\/en\/general-corporate\/investment-contract-additional-closing\/#Process_of_Concluding_an_Investment_Contract\" title=\"Process of Concluding an Investment Contract\">Process of Concluding an Investment Contract<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/monolith.law\/en\/general-corporate\/investment-contract-additional-closing\/#What_is_%E2%80%9CClosing%E2%80%9D_in_an_Investment_Contract\" title=\"What is &#8220;Closing&#8221; in an Investment Contract?\">What is &#8220;Closing&#8221; in an Investment Contract?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/monolith.law\/en\/general-corporate\/investment-contract-additional-closing\/#What_is_%E2%80%9CAdditional_Closing%E2%80%9D_in_an_Investment_Contract\" title=\"What is &#8220;Additional Closing&#8221; in an Investment Contract?\">What is &#8220;Additional Closing&#8221; in an Investment Contract?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/monolith.law\/en\/general-corporate\/investment-contract-additional-closing\/#Is_it_Necessary_to_Include_a_Clause_on_Additional_Closing_in_an_Investment_Contract\" title=\"Is it Necessary to Include a Clause on Additional Closing in an Investment Contract?\">Is it Necessary to Include a Clause on Additional Closing in an Investment Contract?<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/monolith.law\/en\/general-corporate\/investment-contract-additional-closing\/#Procedure_for_Additional_Closings\" title=\"Procedure for Additional Closings\">Procedure for Additional Closings<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/monolith.law\/en\/general-corporate\/investment-contract-additional-closing\/#Method_of_Holding_a_Shareholders%E2%80%99_Meeting_Resolution_for_Each_Procedure\" title=\"Method of Holding a Shareholders&#8217; Meeting Resolution for Each Procedure\">Method of Holding a Shareholders&#8217; Meeting Resolution for Each Procedure<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/monolith.law\/en\/general-corporate\/investment-contract-additional-closing\/#Method_of_Delegating_to_the_Board_of_Directors_after_Holding_a_Shareholders%E2%80%99_Meeting_in_Advance\" title=\"Method of Delegating to the Board of Directors after Holding a Shareholders&#8217; Meeting in Advance\">Method of Delegating to the Board of Directors after Holding a Shareholders&#8217; Meeting in Advance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/monolith.law\/en\/general-corporate\/investment-contract-additional-closing\/#Which_Method_Should_Be_Adopted\" title=\"Which Method Should Be Adopted\">Which Method Should Be Adopted<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/monolith.law\/en\/general-corporate\/investment-contract-additional-closing\/#Key_Points_When_Defining_Additional_Closing_Clauses_in_Investment_Agreements\" title=\"Key Points When Defining Additional Closing Clauses in Investment Agreements\">Key Points When Defining Additional Closing Clauses in Investment Agreements<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/monolith.law\/en\/general-corporate\/investment-contract-additional-closing\/#About_the_Timing_of_Additional_Closings\" title=\"About the Timing of Additional Closings\">About the Timing of Additional Closings<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/monolith.law\/en\/general-corporate\/investment-contract-additional-closing\/#About_the_Number_of_Shares_Issued_at_Additional_Closing\" title=\"About the Number of Shares Issued at Additional Closing\">About the Number of Shares Issued at Additional Closing<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/monolith.law\/en\/general-corporate\/investment-contract-additional-closing\/#Summary_Points_to_Note_in_the_Additional_Closing_Clause_of_Investment_Contracts\" title=\"Summary: Points to Note in the Additional Closing Clause of Investment Contracts\">Summary: Points to Note in the Additional Closing Clause of Investment Contracts<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/monolith.law\/en\/general-corporate\/investment-contract-additional-closing\/#Introduction_to_Our_Firm%E2%80%99s_Measures\" title=\"Introduction to Our Firm&#8217;s Measures\">Introduction to Our Firm&#8217;s Measures<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_an_Investment_Contract\"><\/span>What is an Investment Contract?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img decoding=\"async\" src=\"https:\/\/monolith.law\/wp-content\/uploads\/2022\/07\/investment-contract-additional-closing2.png\" alt=\"People discussing an investment contract\" class=\"wp-image-47209\" \/><\/figure><\/div>\n\n\n<p>An investment contract is an agreement made between an investor and the recipient of the investment. It outlines the terms and conditions of the investment made by the investor.<\/p>\n\n\n\n<p>Specifically, if the recipient of the investment is a corporation, the investment contract may stipulate matters related to the issuance of shares, acquisition of shares, payments made by the investor, representations and warranties, and confidentiality obligations.<\/p>\n\n\n\n<p><a href=\"https:\/\/monolith.law\/corporate\/importance-and-necessity-of-investment-contract\" target=\"_blank\" rel=\"noreferrer noopener\">https:\/\/monolith.law\/corporate\/importance-and-necessity-of-investment-contract[ja]<\/a><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Process_of_Concluding_an_Investment_Contract\"><\/span>Process of Concluding an Investment Contract<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The process of concluding an investment contract generally follows these steps:<\/p>\n\n\n\n<p>First, a Non-Disclosure Agreement (NDA) is signed between the investor and the recipient of the investment.<\/p>\n\n\n\n<p>Next, negotiations are carried out to determine the broad framework of the investment contract. Once this framework is agreed upon, a Letter of Intent (LOI) is signed.<\/p>\n\n\n\n<p>Then, in preparation for the investment contract, the investor conducts due diligence (DD) to decide whether to proceed with the investment. This involves investigating the recipient of the investment.<\/p>\n\n\n\n<p>Once the DD is completed, the investment contract is signed, with any necessary modifications made based on the content of the LOI and the results of the negotiations.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_%E2%80%9CClosing%E2%80%9D_in_an_Investment_Contract\"><\/span>What is &#8220;Closing&#8221; in an Investment Contract?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The term &#8220;closing&#8221; in an investment contract can be used in various ways.<\/p>\n\n\n\n<p>For example, it can refer to the execution of the investment based on the concluded investment contract, or it can refer to the conclusion of the investment contract itself.<\/p>\n\n\n\n<p>In this article, we will explain the term &#8220;closing&#8221; as referring to the conclusion of the investment contract itself.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_%E2%80%9CAdditional_Closing%E2%80%9D_in_an_Investment_Contract\"><\/span>What is &#8220;Additional Closing&#8221; in an Investment Contract?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img decoding=\"async\" src=\"https:\/\/monolith.law\/wp-content\/uploads\/2022\/07\/investment-contract-additional-closing3.png\" alt=\"Image of additional closing\" class=\"wp-image-47210\" \/><\/figure><\/div>\n\n\n<p>&#8220;Additional closing&#8221; refers to conducting additional closings, as the term suggests.<\/p>\n\n\n\n<p>If the relationship between the investor and the recipient of the investment is one-to-one, additional closing is generally not an issue.<\/p>\n\n\n\n<p>However, in the case of startups, for example, it is conceivable that multiple investors will make investments.<\/p>\n\n\n\n<p>In such cases, the circumstances of multiple investors will naturally differ. For example, if the timing of investment decisions differs, the timing of fundraising for investment will be staggered, and the complexity of internal procedures among investors may also cause the actual timing of investment to differ.<\/p>\n\n\n\n<p>Therefore, when multiple investors are involved, it is not always the case that investments are made at the same time. The timing of investment is expected to vary among investors.<\/p>\n\n\n\n<p>Additional closing is a method used to provide flexibility in the timing of investment due to the different circumstances of each investor when multiple investors are involved.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Is_it_Necessary_to_Include_a_Clause_on_Additional_Closing_in_an_Investment_Contract\"><\/span>Is it Necessary to Include a Clause on Additional Closing in an Investment Contract?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In cases where additional closing is not anticipated at all, it is not necessarily required to include a clause on additional closing in the investment contract.<\/p>\n\n\n\n<p>However, unforeseen circumstances may arise, necessitating additional closing.<\/p>\n\n\n\n<p>Therefore, even in cases where additional closing is not anticipated, it is considered prudent to include a clause on additional closing in the contract to prepare for unexpected situations.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Procedure_for_Additional_Closings\"><\/span>Procedure for Additional Closings<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The procedure for additional closings can be primarily divided into two methods.<\/p>\n\n\n\n<p><a href=\"https:\/\/monolith.law\/corporate\/investment-contract-shares-provision\" target=\"_blank\" rel=\"noreferrer noopener\">https:\/\/monolith.law\/corporate\/investment-contract-shares-provision[ja]<\/a><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Method_of_Holding_a_Shareholders%E2%80%99_Meeting_Resolution_for_Each_Procedure\"><\/span>Method of Holding a Shareholders&#8217; Meeting Resolution for Each Procedure<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Firstly, there is a method of holding a shareholders&#8217; meeting resolution for each procedure.<\/p>\n\n\n\n<p>In this method, a shareholders&#8217; meeting resolution is held each time for the decision on the solicitation items at the time of the initial closing and the additional closing.<\/p>\n\n\n\n<p>While this method has the advantage of being able to thoroughly consider each situation by holding a shareholders&#8217; meeting resolution each time, it also has the disadvantage of potentially complicating the procedure.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Method_of_Delegating_to_the_Board_of_Directors_after_Holding_a_Shareholders%E2%80%99_Meeting_in_Advance\"><\/span>Method of Delegating to the Board of Directors after Holding a Shareholders&#8217; Meeting in Advance<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Next, there is a method of delegating to the board of directors after holding a shareholders&#8217; meeting in advance.<\/p>\n\n\n\n<p>In this method, a shareholders&#8217; meeting resolution is first held before the initial closing to decide on the upper limit of the solicited shares and the lower limit of the payment amount.<\/p>\n\n\n\n<p>This sets the overall framework.<\/p>\n\n\n\n<p>Afterwards, within the range of the upper limit of the solicited shares and the lower limit of the payment amount decided at the shareholders&#8217; meeting resolution, the specific decision on the solicitation items is delegated to the board of directors.<\/p>\n\n\n\n<p>This method generally allows for more flexible operation than the method of holding a shareholders&#8217; meeting resolution for each procedure.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Which_Method_Should_Be_Adopted\"><\/span>Which Method Should Be Adopted<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>As for which method should be adopted, it is impossible to make a blanket judgment as various cases can be considered depending on the institutional design and the method of accepting shares, etc.<\/p>\n\n\n\n<p>Therefore, it is necessary to thoroughly consider and decide on which method to adopt. If it is difficult to make a decision, it is recommended to consult with a lawyer who is familiar with investment contracts.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Key_Points_When_Defining_Additional_Closing_Clauses_in_Investment_Agreements\"><\/span>Key Points When Defining Additional Closing Clauses in Investment Agreements<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img decoding=\"async\" src=\"https:\/\/monolith.law\/wp-content\/uploads\/2022\/05\/shutterstock_1670634652.jpg\" alt=\"Image of a checkpoint\" class=\"wp-image-44463\" \/><\/figure><\/div>\n\n\n<p>In the following, we will explain the points to be careful about when defining clauses related to additional closings in investment agreements.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"About_the_Timing_of_Additional_Closings\"><\/span>About the Timing of Additional Closings<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>When defining clauses related to additional closings in investment agreements, it is necessary to first clarify the timing of the additional closing.<\/p>\n\n\n\n<p>Additional closing is a method used to provide some flexibility in the timing of investment, but if the timing of investment deviates too much, there is a possibility that the situation such as stock prices may change significantly.<\/p>\n\n\n\n<p>Therefore, it is important to clearly define the timing of the additional closing.<\/p>\n\n\n\n<p>Although the timing of the additional closing is case-by-case, it seems that it is often set to be 1 or 2 months in many cases.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"About_the_Number_of_Shares_Issued_at_Additional_Closing\"><\/span>About the Number of Shares Issued at Additional Closing<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Next, when defining clauses related to additional closings in investment agreements, it is necessary to clarify the number of shares to be issued.<\/p>\n\n\n\n<p>For investors who invested early, the additional closing may result in a relative decrease in their shareholding ratio, which may pose a risk of trouble.<\/p>\n\n\n\n<p>Normally, adjustments are made between investors who invested earlier and those who invest later, but to prevent future troubles, it is important to explicitly state the number of shares to be issued when defining clauses related to additional closings in investment agreements.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Summary_Points_to_Note_in_the_Additional_Closing_Clause_of_Investment_Contracts\"><\/span>Summary: Points to Note in the Additional Closing Clause of Investment Contracts<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img decoding=\"async\" src=\"https:\/\/monolith.law\/wp-content\/uploads\/2022\/07\/investment-contract-additional-closing1.png\" alt=\"People making a contract\" class=\"wp-image-47208\" \/><\/figure><\/div>\n\n\n<p>In this article, we have explained the points to be aware of in additional closings in investment contracts, targeting investors.<\/p>\n\n\n\n<p>The choice of additional closing procedures and the provisions of clauses related to additional closings in investment contracts need to be determined on a case-by-case basis, after investigating and considering various circumstances.<\/p>\n\n\n\n<p>Therefore, if you are considering entering into an investment contract or have questions about additional closings, we recommend consulting with a lawyer who has specialized knowledge.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Introduction_to_Our_Firm%E2%80%99s_Measures\"><\/span>Introduction to Our Firm&#8217;s Measures<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Monolith Law Office is a legal office with high expertise in both IT, particularly the Internet, and law. When it comes to investment contracts, it is necessary to create a contract document. Our firm handles the creation and review of contract documents for various cases, from companies listed on the Tokyo Stock Exchange Prime Market to venture companies. If you have any trouble with contract documents, please refer to the article below.<\/p>\n\n\n<figure class=\"is-type-wp-embed\">\n<div><a href=\"https:\/\/monolith.law\/contractcreation\" target=\"_blank\" rel=\"noopener\">https:\/\/monolith.law\/contractcreation[ja]<\/a><\/div>\n<\/figure>","protected":false},"excerpt":{"rendered":"<p>Generally, various preparations are made towards the conclusion of an investment contract, such as negotiations on investment terms and due diligence. Once these preparations are completed, the invest [&hellip;]<\/p>\n","protected":false},"author":32,"featured_media":60899,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[18],"tags":[24,28],"acf":[],"_links":{"self":[{"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/posts\/60197"}],"collection":[{"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/users\/32"}],"replies":[{"embeddable":true,"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/comments?post=60197"}],"version-history":[{"count":1,"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/posts\/60197\/revisions"}],"predecessor-version":[{"id":60900,"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/posts\/60197\/revisions\/60900"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/media\/60899"}],"wp:attachment":[{"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/media?parent=60197"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/categories?post=60197"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/monolith.law\/en\/wp-json\/wp\/v2\/tags?post=60197"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}