The restrictions on when an investor can exit an investment can vary and depend on several factors such as the investment structure, the agreement between the investor and the company, and any regulatory requirements. Here are a few common exit restrictions:
- Lock-up period: This is a contractual agreement between the investor and the company, which restricts the investor from selling their shares for a specified period of time after the investment. The lock-up period is typically 6 to 12 months after the investment.
- Right of first refusal: This gives the company or existing shareholders the right to purchase the investor’s shares before they can be sold to another party.
- Transfer restrictions: The investment agreement may include restrictions on the transfer of shares, such as a requirement for the company’s approval or a restriction on transferring the shares to competitors.
- Regulatory restrictions: Depending on the jurisdiction, there may be regulatory restrictions on when an investor can exit an investment, such as securities laws that limit the sale of shares to the public.
It’s important to carefully review the investment agreement and understand the terms of the investment before making a decision.