What is a capital call?
Capital call or drawing is a legal right that allows risk funds to require the transfer of promised funds from investors. The term 'capital call' is used to indicate this legal right and actively in practice. Capital calls are used to ensure that the risk fund has the capital it needs when it requires it, and to confirm that investors are committed to the project.
Contracting obligation
The investor undertakes to the fund in a contract that includes a clause explaining capital call. The investor does not have to transfer funds immediately, instead waiting for the fund to receive obligations from other investors and selected a project in which it can be invest. After the risk fund is ready to launch the project, it will issue a capital call where investors will have to transfer their promised funds to the company. The existence of an agreement on capital attracts other investors and shows them that the fund is a series and capable of drawing from the large investment capital fund.
protects the company
Venture companies count on the availability of promised funds when negotiating potential investments and projects. If investors return from their obligations, it may be a serious problem for the company because it could plan these funds. Capital calls protect risks groups from unexpected deficiency in capital and ensure that the flow of funds is available when required.
provides investor
Investors are also protected to some extent by capital calling. When the investor undertakes to participate in the risk fund, it is assured that other investors will have to inject capital when towing. This means that the risk fund is more likely to succeed and raises the return on investment. Investors can rely on coordinated Whole means to create a good return, so capital calls are for their safety kriticka.
Legal Requirements
When people have committed themselves to investing in funds, they will usually be provided with information about capital calls and how they work. In some regions, risk funds are required by law to enhance certain legal aspects of the investment agreement, including a capital call. New investors are advised to consult with people who have experience in the investment industry to make sure they know everything about the investments they are involved with.