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Saksham
•
Bebyond • 10m
Understanding the Lock-in Period The lock-in period is a key feature in investment agreements, especially in private equity and venture capital deals. It’s a designated timeframe during which shareholders, typically founders or early investors, are restricted from selling or transferring their shares. Why does it matter? The lock-in period provides stability. It ensures that key stakeholders maintain skin in the game, aligning their long-term interests with the company’s growth. For investors, this is critical—it prevents founders from cashing out too early, potentially leaving the business vulnerable. However, it's not just about limitations. Once the lock-in period expires, shareholders gain liquidity and flexibility to exit or reallocate their investments. It’s a balancing act between protecting the company's future and offering eventual freedom for investors. Always review the terms carefully, as lock-in periods can vary significantly based on the deal structure.
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