Investment Agreement - what it is, how it is formalized, and a sample for concluding an agreement

Investment activity is the driving force behind the development of any economy. To attract capital in business projects, startups, construction or scientific developments, a clear legal instrument is needed that regulates the relations between those who invest money and those who receive it. Such an instrument is the investment agreement (the main answer to the question what is an investment agreement).

Unlike a typical sales contract or loan, an investment agreement has a specific purpose: obtaining profit in the future or achieving another beneficial effect.

As of 2026, there is no separate law in Ukraine that specifically regulates the investment agreement. The parties are governed by the general provisions of the Civil Code on obligations, as well as special laws on investment activities. Incorrectly drafting such an agreement can lead to its recognition as not concluded or a loss of investments.

The essence of the investment agreement as a legal instrument

An investment agreement (including a sample investment agreement) is a written agreement under which one party, the investor, transfers to another party, the recipient, monetary funds, property or property rights with the aim of obtaining profit or achieving another socio-economic effect. It is consensual, meaning it is considered concluded from the moment an agreement is reached on all essential terms. It is also bilateral, as it generates rights and obligations for both parties.

The main difference between the investment agreement and the loan agreement is that the investor does not have the right to demand the return of the invested funds within a fixed period. Their income depends on the success of the project. This is a risky agreement. Another difference is the targeted nature of the investments. The recipient is obliged to use the funds received exclusively for the implementation of the project specified in the agreement.

In the case of improper use of funds, the investor may demand the termination of the agreement and the return of the funds. The investment agreement can be both paid and free of charge. In practice, it is always paid, as the investor expects to make a profit. The form of the agreement must necessarily be written. Notarization is not mandatory but is recommended for investments in real estate. The investment agreement can be concluded for the benefit of the investor or for third parties. The agreement may provide for the transfer of a share in the charter capital of the recipient to the investor or receiving a percentage of the profit.

The parties and subject of the investment agreement

The parties to the investment agreement are the investor and the investment recipient, who may also be referred to as the customer or the recipient. The investor is a physical or legal person who provides their own funds for the implementation of the project. The investor can be both a domestic and a foreign person. Additional guarantees apply to foreign investors, as provided by law. The recipient is the person who receives the investments and implements the project. The recipient can be an individual entrepreneur, a legal entity, or a group of individuals without legal entity status, for example, a startup team. The subject of the investment agreement includes the actions of the parties directed towards implementing the investment project. The subject includes:

1. A list of property rights and intellectual property objects being transferred.
2. The volume and terms of financing.
3. The procedure for monitoring the targeted use of funds.
4. Conditions for distributing profits or transferring a share in the business.

The subject must be described as specifically as possible. It is not permissible to write funding for a project to improve the business. It should be specified: funding for the development of a mobile application according to the technical specification according to Appendix 1. Additionally, the subject may include not only the transfer of money but also equipment, real estate, and intangible assets. The valuation of non-monetary contributions must be carried out by an independent appraiser. If the subject is real estate, the agreement is subject to notarization and state registration. The investment agreement also specifies the investor's share in the profits. It can be fixed or floating. The floating share is tied to the sales volume or other indicators.

Essential conditions of the investment agreement

Essential conditions are those without which the agreement is considered not concluded. The parties have the right to define any conditions as essential, but the law requires the mandatory presence of some. The essential conditions of the investment agreement include:

1. The subject of the agreement described above.
2. The price of the agreement or the procedure for determining it. This is the total amount of investments.
3. The duration of the agreement and the deadlines for the investments to be made.
4. The conditions and procedure for profit distribution.
5. The liability of the parties for breach of obligations.
6. The procedure for resolving disputes.

The absence of any of these conditions makes the agreement not concluded. The price of the agreement can be expressed in either the national or foreign currency. Payments in foreign currency between residents are prohibited, so the amount should be indicated in the equivalent in hryvnias. The duration of the agreement can be determined by a date or an event. For example, until the project reaches the planned profitability indicators. The conditions for profit distribution must be clear. For example, 30 percent of the net profit is directed to the investor, and 70 percent remains with the recipient for development. If there is no profit, the investor receives nothing. Responsibility for overdue investments may take the form of a penalty or the recipient's right to attract another investor. The parties may add other essential conditions, for example, prohibiting the recipient from entering into similar agreements with competitors.

The procedure for concluding and formalizing the investment agreement

The process of concluding an investment agreement consists of several stages, each of which has legal significance. The first stage is the offer to conclude the agreement. The offer can be sent by either the investor or the recipient. It must contain all essential conditions. For example, the recipient sends a business plan and draft agreement to potential investors. The second stage is acceptance, that is, a response to accept the offer. The acceptance must be full and unconditional. If the person receiving the offer proposes to change the terms, this is considered a new offer.

The third stage is reaching an agreement on all essential conditions. The parties agree on the final text of the agreement. It is recommended to record this in a protocol of disagreements. The fourth stage is signing the agreement. The signatures of the parties must be handwritten. If the parties use an electronic signature, it must be a qualified signature equivalent to a handwritten one. The fifth stage is notarization, if it is provided by law or the agreement of the parties. For agreements on investments in real estate, notarization is mandatory.

The sixth stage is state registration. If the agreement provides for the transfer of real estate or corporate rights, it is subject to registration. After registration, the agreement is considered concluded. From this moment, it comes into effect. It is important to remember that an investment agreement can be concluded with a suspensive condition. For example, it comes into effect after the recipient receives permission for construction.

Sample investment agreement and its structure

Speaking of the investment agreement sample, it can also vary somewhat. A typical investment agreement has a clear structure consisting of mandatory sections. Below is a sample of such a structure for a private investor and a startup.

What is being discussed:

1. Section 1. The subject of the agreement. The parties agreed on the implementation of an investment project to create an online platform for food delivery. The investor agrees to provide funding of 2,000,000 hryvnias, and the recipient agrees to use it for the purposes specified in the budget.
2. Section 2. Rights and obligations of the parties. The investor has the right to control the targeted use of funds and receive information about the progress of the project. The recipient is obliged to provide quarterly reports.
3. Section 3. The procedure for financing. The investor transfers funds to a separate account of the recipient in three stages: 500,000 hryvnias by January 1, 2026, 750,000 hryvnias by March 1, and 750,000 hryvnias by June 1.
4. Section 4. Profit distribution. The net profit of the project is distributed in the ratio of 40 percent to the investor and 60 percent to the recipient. Distribution is carried out annually.
5. Section 5. The duration of the agreement. The agreement is valid until December 31, 2030. After this period, the investor's share in the profit ceases, but other obligations remain unfulfilled.
6. Section 6. Liability of the parties. For delayed payment, the investor pays a penalty equal to double the NBU's discount rate. For improper use of funds, the recipient pays a penalty of 100 percent of the improper amount.
7. Section 7. Force majeure. The parties are exempt from liability in case of extraordinary events.
8. Section 8. Dispute resolution. Disputes are resolved in the International Commercial Arbitration Court at the Chamber of Commerce and Industry of Ukraine.
9. Section 9. Other conditions. The agreement is executed in three copies in Ukrainian.
10. Section 10. Details and signatures of the parties. The full information of the investor and recipient is specified.

These are the main parts of the agreement.

Rights, obligations and responsibilities of the parties

An investment agreement generates a wide range of rights and obligations for the parties, violation of which entails legal liability. The investor has the right to obtain complete and reliable information about the progress of the project. They can require reports, conduct audits through their representatives. The investor also has the right to timely receive their share of the profits. If the recipient delays payment, the investor can demand a penalty. Additionally, the investor has the right to withdraw from the agreement if the recipient systematically violates the terms. For example, using funds for purposes other than specified. The investor also has the right to demand the early return of investments in cases provided for in the agreement. For example, in the event of the recipient's liquidation.

As for the obligations, the investor is obliged to timely and fully contribute the agreed amount. They do not have the right to interfere in the operational activities of the recipient unless otherwise specified in the agreement. They are also obliged not to disclose the commercial secrets obtained during the implementation of the project. The recipient has the right to receive investments in the time and amounts specified in the agreement. They have the right to independently determine the methods of achieving the project's goals, as long as it does not contradict the terms. The recipient also has the right to prematurely terminate the agreement if the investor fails to fulfill their obligations. The obligations of the recipient are numerous. They are obliged to use the funds exclusively for the purposes defined in the agreement. They are obliged to keep separate accounts of the funds received from the investor. They are obliged to regularly report to the investor. The report must include information about expenditures, achieved indicators, and plans.

The recipient is obliged not to enter into agreements that may impair their ability to fulfill the obligations to the investor. Liability for breaching the terms of the agreement arises in the forms provided by law or the agreement. This may involve paying a penalty, a fine, and compensating for damages. Damages include actual losses and lost profits. Proving the amount of lost profits is very complex, so in practice, the parties prefer contractual penalties. The strictest form of liability is unilateral termination of the agreement and return of everything received.

Investment risks and typical problems of the agreement

Investing is always associated with risks, and the investment agreement cannot completely eliminate them. The main risk is the risk of not receiving profits. The project may turn out to be unprofitable, or the recipient may irrationally use the funds. The second risk is the risk of losing investments. In case of the recipient's bankruptcy, the investor has the right to satisfy their claims only in common order with other creditors. The third risk is the risk of fraud. An unscrupulous recipient may simply misappropriate the funds. Minimizing this risk involves careful due diligence: studying incorporation documents, tax reporting, and court cases. The fourth risk is legal uncertainty.

Due to the absence of a specific law, courts may interpret the investment agreement differently. There is a risk that it may be requalified as a loan agreement or joint activity. This will lead to other legal consequences. The fifth risk is the risk of legislative changes. For example, tax legislation may change, making the project unprofitable. Typical problems arising in the conclusion of an investment agreement are often related to the vagueness of the formulations. For example, the goals of the project are defined in general terms as the development and implementation of a software product. This allows the recipient to spend funds on anything. Another problem is the absence of a control mechanism. If the investor did not provide for the right to check expenses, they will not be able to prove improper use.

The third problem is the absence of a clear formula for profit distribution. The phrase that the parties share profits proportionally to their contributions may lead to disputes. What qualifies as profit? Gross income or net profit after taxation? The fourth problem is the absence of payment deadlines for profits. The recipient may delay payments for years. The fifth problem is the absence of guarantees for the return of investments in the event of failure. If the project fails, the investor loses everything. The sixth problem is the non-compliance of the agreement with currency legislation. If the sum is specified in foreign currency, and the parties are residents, the agreement may be recognized as invalid. The seventh problem is forgery of signatures. Notarization of the agreement reduces this risk. The eighth problem is the loss of documents. Keep the agreement in several copies in different places. To minimize risks, it is recommended to involve a lawyer at the negotiation stage, clearly stipulate all terms, foresee control and liability mechanisms. It is also advisable to consider the possibility of collateral or guarantees. For example, the recipient provides their property as collateral to the investor.