Affirmative Covenants . . . 

refer to the contractual provisions in a venture funding that the company and its management agree to fulfill after the funding is complete. The covenants typically appear in the financing or stock purchase agreement and are often accompanied by "negative covenants" which obligate the company to refrain from taking certain actions after the funding. Common affirmative covenants include:

• Access to records. The company will give the investor and its representatives reasonable access to company records and personnel.
  

• Financial reports. The company will furnish the investor with regular financial reports on the status of the company. Balance sheets, profit and loss statements, and cash flow statements are usually provided monthly, quarterly, and annually. Audited annual statements are often required. Sometimes a short "state of the company" statement is also required from the company president on a monthly basis.
  

• Budgets. The company will prepare annual budgets which must be approved by the board of directors or, sometimes, by the investor.
  

• Existence and maintenance of property. The company will preserve its corporate existence and all rights necessary to conducts its business and own its properties. The company will keep its properties in good repair.
  

• Insurance. The company will maintain adequate insurance. Often, the company also agrees to purchase key man insurance on the lives of management.
  

• Payment of debts and taxes. The company will pay its debts and taxes in accordance with normal terms.
  

• Compliance with laws and agreements. The company will comply with all laws applicable to it and perform its obligations under its agreements.
  

• Litigation and other notices. The investor will be promptly notified of any lawsuit, default under a major agreement, or other event that could have a material adverse effect on the company or its operations.
  

• Proprietary rights protection. The company will take reasonable steps to protect its patents, trade secrets and copyrights. These steps may include securing secrecy or non-competition agreements from company employees.
  

• Use of proceeds. The company will use the funds provided by the investor in the manner described.
  

• Accounting system. The company will maintain its current accounting system.
  

• Board of directors. Management shareholders will vote their shares to assure the investor of a representative on the company's board of directors.

Affirmative covenants can also relate to specific deal points that are to be performed after the closing of a funding such as management's undertaking to identify an additional board member or hire a suitable chief financial officer or other designated officer to round out management. Sometimes investors require management agreements that engage them as paid consultants to the company after funding. See: Consulting Agreements, Financing Agreements, Key Man Insurance, Management Agreements, Negative Covenants, Operating Covenants, Reps & Warranties, Take Away Provisions.