Investing in a friend’s venture in the Philippines is a high-stakes balancing act between financial ambition and personal relationship. While "handshake deals" are common in Filipino culture (tiwala), the legal reality is that clear documentation is the only way to prevent a business dispute from ending a friendship.

Under Philippine law—primarily the Revised Corporation Code (RA 11232) and the Civil Code—the following documents are essential to define rights, protect capital, and ensure regulatory compliance.

1. The Preliminary Phase: Memorandum of Agreement (MOA)

Before money changes hands, a Memorandum of Agreement or Term Sheet outlines the broad strokes of the deal.

Purpose: It acts as a roadmap, stating how much you are investing and what you get in return (e.g., 20% equity vs. a convertible loan).
Key Clauses: It should specify the "valuation" of the business and whether the investment is a one-time payment or milestone-based. While often non-binding in some parts, it sets the "moral" and "legal" foundation for the final contracts.

2. The Core Investment: Subscription Agreement or Deed of Assignment

The document that officially makes you an owner depends on the business's current stage:

Subscription Agreement: Used if the business is a corporation issuing new shares from its unissued capital stock. You are "subscribing" to these shares directly from the company.
Deed of Assignment of Shares: Used if you are buying existing shares directly from your friend. This is a private sale between individuals that must be recorded in the company’s Stock and Transfer Book.
Partnership Agreement: If the business is registered as a Partnership with the SEC (rather than a Corporation), this document defines your share in the profits and losses and your level of liability.

3. The Rulebook: Shareholders’ Agreement (SHA)

This is arguably the most important document for an investor. While the company’s Bylaws provide general rules, the Shareholders’ Agreement is a private contract that goes into granular detail about your protections.

Right of First Refusal (ROFR): If your friend decides to sell their stake to a stranger, they must offer it to you first.
Tag-Along Rights: If your friend sells their majority stake, you have the right to join the sale on the same terms, ensuring you aren't left behind with a new, unknown partner.
Pre-emptive Rights: Ensures you have the right to buy more shares in future funding rounds to avoid having your ownership percentage "diluted."
Governance: Defines which decisions require your explicit consent (e.g., taking out a massive loan or changing the core business).

4. The Debt Alternative: Promissory Note

If you prefer to lend money rather than own a piece of the company, you need a Promissory Note.

Interest Rates: Under Philippine law, interest must be expressly stipulated in writing to be enforceable.
Collateral: If the business fails, a "Secured" Promissory Note allows you to claim specific assets (like equipment or property) to recover your investment.

5. Regulatory Compliance: Articles of Incorporation and Bylaws

You must ensure the business's foundational documents at the Securities and Exchange Commission (SEC) reflect the new reality.

Amendment of Articles: If the investment requires increasing the authorized capital stock, the company must file an amendment with the SEC.
General Information Sheet (GIS): Following the investment, the Corporate Secretary must update the GIS within 30 days of the change in ownership to reflect your name as a shareholder.

Critical Protections for the Investor

Document	Primary Protection
Non-Disclosure Agreement (NDA)	Prevents the friend/business from leaking your financial data or trade secrets.
Voting Trust Agreement	If you want to invest but let your friend handle all the voting and management.
Non-Compete Agreement	Prevents your friend from taking your investment, closing the shop, and opening an identical business next door.

Legal Note: In the Philippines, for these documents to be fully enforceable against third parties and for certain SEC processes, they must be notarized. A notarized document is considered "public," carrying more weight in Philippine courts than a simple private signature.