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A Pro-rata side letter to Investment agreement gives existing investors the right to maintain their ownership percentage by participating in future funding rounds. In Indonesia's rapidly growing startup ecosystem, these letters protect early investors from having their shares diluted when companies raise additional capital.

Under Indonesian investment law (POJK 53/2017), this agreement typically works alongside the main investment documents and helps align with OJK regulations on capital market activities. It spells out exactly how and when investors can buy new shares, usually giving them 14-30 days to exercise their pro-rata rights after receiving notice of a new funding round.

Use a Pro-rata side letter to Investment agreement when bringing early investors into Indonesian startups, particularly during Series A rounds and beyond. This document becomes essential before any new funding round where you need to protect existing investors' rights to maintain their ownership percentage.

The timing matters most when planning follow-on investments under OJK regulations. Early-stage companies growing in sectors like technology, healthcare, or e-commerce need this agreement in place before approaching new investors. It helps avoid disputes about participation rights and ensures compliance with Indonesian capital market rules on share dilution and minority shareholder protection.

• Full participation rights: The standard Pro-rata side letter gives investors the right to maintain their exact ownership percentage in all future funding rounds
• Capped participation: Limits the pro-rata right to specific funding rounds or up to a maximum investment amount, common in Indonesian tech startups
• Qualified pro-rata: Only triggers for funding rounds above certain valuation thresholds, protecting company flexibility in smaller rounds
• Major investor pro-rata: Reserves these rights for investors meeting minimum investment thresholds under OJK guidelines
• Time-limited rights: Pro-rata rights that expire after specific periods or funding events, often used in early-stage Indonesian ventures

• Venture Capital Firms: Early investors who want to maintain their ownership percentage in future funding rounds, especially active in Indonesia's tech sector
• Startup Founders: Need to balance existing investor rights with flexibility to attract new capital while complying with OJK regulations
• Corporate Lawyers: Draft and negotiate the terms of pro-rata rights, ensuring alignment with Indonesian investment laws
• Angel Investors: Individual investors seeking protection against dilution in subsequent funding rounds
• Investment Banks: Help structure deals and advise on pro-rata provisions during fundraising activities

• Investment Details: Gather current capitalization table, investment amounts, and shareholding percentages of existing investors
• Participation Terms: Define notice periods, response deadlines, and investment caps aligned with OJK regulations
• Company Information: Collect latest company valuation, planned funding rounds, and growth projections
• Stakeholder Input: Confirm participation rights with board members and align with existing shareholder agreements
• Documentation Review: Check compliance with Indonesian investment laws and ensure consistency with main investment agreement terms

• Identification Section: Names, addresses, and registration details of all parties, including company registration number from MOLHR
• Pro-rata Rights: Clear definition of participation rights, notice requirements, and exercise periods
• Funding Round Terms: Specifications for qualifying transactions and investment thresholds under OJK guidelines
• Exercise Mechanics: Detailed process for exercising rights, payment terms, and share issuance procedures
• Governing Law: Express reference to Indonesian law and relevant OJK regulations
• Execution Block: Authorized signatures, company stamps, and proper witnessing requirements

A Pro-rata side letter significantly differs from a standard Investment Agreement in both scope and purpose. While both documents deal with investment terms, they serve distinct functions in Indonesian business transactions.

• Scope and Focus: Pro-rata side letters specifically address future investment rights, while Investment Agreements cover the entire investment relationship, including valuation, governance, and exit rights
• Timing of Use: Side letters activate during subsequent funding rounds, whereas Investment Agreements govern the initial investment terms
• Legal Standing: Under OJK regulations, side letters function as supplementary documents, while Investment Agreements serve as primary contractual foundations
• Flexibility: Pro-rata side letters can be modified or terminated without affecting the main investment terms, offering greater adaptability in evolving startup scenarios