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A Pro-rata side letter to Investment agreement gives existing investors the right to maintain their ownership percentage in future funding rounds of a Malaysian company. It's essentially a promise that lets investors buy more shares later to avoid dilution when new investors come in.

Under Malaysian securities law, these letters help protect early investors while giving companies flexibility to raise additional capital. They're particularly common in startup investments and venture capital deals, where multiple funding rounds are expected. The letter typically specifies the notification process, timeframes for exercising the rights, and any limitations under local regulations.

Use a Pro-rata side letter to Investment agreement when bringing early investors into your Malaysian startup or growth company. It's particularly valuable when you expect multiple funding rounds and want to keep your initial investors engaged for the long term. These investors often bring valuable expertise and networks beyond just capital.

The timing matters most during Series A negotiations, as investors evaluate their future participation rights. Malaysian companies planning expansion through venture capital or institutional funding need these letters to align investor interests and maintain stable governance. They're especially crucial for tech startups and high-growth sectors where capital needs increase rapidly.

• Full Pro-rata Rights: Gives investors the right to participate in all future funding rounds, maintaining their exact ownership percentage. Common in Malaysian venture capital deals.
• Capped Pro-rata: Limits participation rights to specific rounds or investment amounts. Helps companies maintain flexibility while still protecting early investors.
• Qualified Pro-rata: Only activates when certain conditions are met, like minimum investment thresholds or specific business milestones. Popular among Malaysian angel investors.
• Time-Limited Pro-rata: Rights expire after specific periods or funding rounds, balancing investor protection with long-term company autonomy.

• Venture Capital Firms: Primary beneficiaries who request Pro-rata side letters to protect their investment position in Malaysian startups through future funding rounds.
• Angel Investors: Early-stage investors who use these agreements to maintain their equity stake and influence as companies grow.
• Corporate Legal Teams: Draft and review the letters to ensure compliance with Malaysian securities regulations and corporate governance standards.
• Startup Founders: Sign and implement these agreements, balancing existing investor rights with future fundraising flexibility.
• Investment Bankers: Advise on terms during fundraising rounds and help structure pro-rata rights that align with market standards.

• Investment Details: Gather current ownership percentages, investment amounts, and valuation from original agreements.
• Participation Terms: Define exact pro-rata rights, including any caps or limitations on future round participation.
• Notice Requirements: Specify how and when investors must be notified of new funding rounds under Malaysian securities laws.
• Exercise Period: Set clear timeframes for investors to exercise their pro-rata rights.
• Documentation Review: Our platform streamlines this process by generating customized, legally-compliant letters that include all essential elements.
• Signing Authority: Confirm proper authorization levels for both company and investor representatives.

• Parties & Identification: Full legal names and details of both investor and company, including registration numbers under Malaysian law.
• Pro-rata Rights: Clear definition of participation rights, calculation method, and conditions for future rounds.
• Notice Provisions: Specific timelines and methods for notifying investors of new funding opportunities.
• Exercise Mechanics: Detailed process for exercising pro-rata rights, including payment terms and deadlines.
• Governing Law: Explicit reference to Malaysian law and jurisdiction.
• Integration Clause: Connection to main investment agreement and any existing shareholder agreements.
• Termination Terms: Conditions when pro-rata rights expire or become invalid.

A Pro-rata side letter to Investment agreement differs significantly from a standard Investment Agreement in both scope and purpose within Malaysia's legal framework. While both documents deal with investment terms, they serve distinct functions in protecting investor interests.

• Primary Focus: Pro-rata side letters specifically address future investment rights, while Investment Agreements cover the complete terms of the current investment round.
• Timing of Effect: Pro-rata letters look forward to future rounds, whereas Investment Agreements govern immediate investment terms and conditions.
• Document Relationship: The side letter supplements the main Investment Agreement, acting as an additional right rather than a standalone agreement.
• Scope of Terms: Pro-rata letters focus solely on maintaining ownership percentages in future rounds, while Investment Agreements cover valuation, share class, voting rights, and broader investor protections.