Angels are spiritual beings believed to act as messengers or guardians, often depicted as benevolent and ethereal figures in various religious and mythological traditions. They are commonly associated with protection, guidance, and divine intervention.
Angels, in a legal context, refer to individuals or entities that provide financial support to startups or early-stage companies in exchange for equity ownership or convertible debt. These individuals are commonly referred to as angel investors.
Angel investments are typically made during the early stages of a company’s development when traditional sources of funding, such as banks or venture capital firms, may be unavailable or reluctant to invest. Angels often provide not only capital but also mentorship, industry expertise, and valuable networks to help the company grow.
From a legal perspective, angel investments are governed by various laws and regulations, depending on the jurisdiction. In many countries, securities laws apply to angel investments, requiring compliance with disclosure requirements and investor protection measures. These laws aim to ensure that investors receive adequate information about the investment opportunity and that their rights are protected.
Angel investors may also enter into legal agreements with the company, such as a shareholders’ agreement or convertible note agreement. These agreements outline the terms and conditions of the investment, including the amount invested, the equity or debt instrument received, and any rights or restrictions attached to the investment.
Additionally, angels may benefit from tax incentives or exemptions provided by the government to encourage investment in startups. These incentives can vary widely depending on the jurisdiction and may include tax credits, deductions, or exemptions on capital gains.
Overall, angel investments play a crucial role in fostering innovation and supporting the growth of startups. While legal considerations are important to protect the interests of both investors and companies, the relationship between angels and startups is often characterized by a high level of trust and collaboration.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 29th March 2024.
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