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Simple English definitions for legal terms
guaranteed investment contract
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A quick definition of guaranteed investment contract:
A guaranteed investment contract is an agreement where someone invests their money and expects to make a profit from the efforts of someone else. It's like giving your money to someone else to invest for you, and if they promise to give you back your money plus some extra at the end, it's called a guaranteed investment contract. It's often used by big organizations like pension funds who want to invest a lot of money at once.
A more thorough explanation:
A guaranteed investment contract is a type of investment contract where an institutional investor, such as a pension fund, invests a lump sum with an insurer. The insurer promises to return the principal amount and a certain amount of interest at the end of the contract.
Investment contract, on the other hand, is an agreement or transaction where a party invests money in the expectation of profits derived from the efforts of a promoter or other third party. It is a contract in which money is invested in a common enterprise with profits to come solely from the efforts of others. In such an arrangement, the investor typically does not receive the right to exercise control over the managerial decisions of the enterprise.
For example, if a person invests money in a company that promises to double their investment in a year, and the profits come solely from the efforts of the company's management, it is an investment contract. The investor does not have control over the company's decisions, and the profits are solely dependent on the company's performance.
Another example of an investment contract is a crowdfunding campaign where people invest money in a project in the expectation of profits derived from the efforts of the project's promoter. The investors do not have control over the project's decisions, and the profits are solely dependent on the project's success.