Harper James advises UK start-ups and scale-ups on the corporate and commercial legal work involved in fundraising under the laws of England and Wales. Preparing early helps the company present accurate information, identify approval requirements and reduce avoidable delays during due diligence.
Start by agreeing the proposed investment structure and recording the main commercial terms in a term sheet. The structure may involve an issue of new shares, an advance subscription agreement, or another form of investment instrument. Review the cap table to confirm existing holdings, option rights, share classes and promised allocations. The company should also assess whether the investment is intended to qualify for SEIS or EIS relief, since the relevant conditions affect both the transaction documents and post-completion compliance.
Check the articles of association and any shareholder agreement before accepting investment terms. Existing shareholders may have pre-emption rights, consent rights or obligations affecting the issue of new shares. The board and shareholders must approve the transaction in accordance with the company’s constitution and the Companies Act 2006. Any changes to share rights, directors or ownership must be reflected in the appropriate Companies House filings.
Investors usually review corporate records, material contracts, intellectual property, employment arrangements, data protection processes, property commitments, litigation and financial information. Create a document list and organise the information in a secure data room. Common gaps include unsigned customer contracts, missing IP assignments from founders or contractors, outdated statutory registers, inconsistent option records and unclear ownership of software or trade marks.
The company should identify issues before the investor does and decide how each will be addressed. Some matters require corrective action, while others are recorded in a disclosure letter against warranties in the investment agreement. The scope of warranties, indemnities and limitations of liability should reflect the company’s size, the transaction structure and the information available to the parties.
The final documents generally include an investment or subscription agreement, updated articles of association and an amended shareholder agreement. They set out the shares issued, investor protections, information rights, reserved matters, transfers, founder obligations and arrangements for future funding or an exit. Completion should follow a clear checklist covering signatures, funds, board resolutions, shareholder approvals, share certificates, statutory registers and Companies House filings.
After completion, update the cap table and corporate records, issue any agreed notices and diarise continuing obligations. These may include investor reporting, board meetings, compliance with reserved matters and the administration of an EMI option scheme. A funding round therefore involves more than negotiating valuation. It requires an accurate corporate record, a controlled due diligence process and documents that match how the business will operate after investment.