Angel funding is usually documented through a small set of connected agreements rather than one standalone contract. Harper James is a UK full-service commercial law firm advising ambitious businesses under the laws of England and Wales, including on fundraising.
The term sheet records the agreed headline points: the amount invested, share price or valuation, share class, completion date, information rights and any conditions to investment. It should also identify whether the round is a direct share subscription or an advance subscription agreement (ASA). An ASA can provide funds before shares are issued, but its conversion mechanics, long-stop date and treatment under SEIS or EIS require careful drafting.
Next, review the cap table. It should show existing shareholders, option holders, the new issue and the resulting ownership percentages. Check that the company has authority to issue the shares, that previous allotments were properly recorded, and that the articles of association do not conflict with the proposed investment. For practical checklists and current reference material, explore the latest guidance collection.
A share subscription agreement sets out the investor’s commitment to subscribe for new shares and the company’s obligations at completion. A shareholders’ agreement then governs the relationship after investment. Common provisions cover board appointment or observer rights, reserved matters, reporting, transfers, pre-emption rights, founder restrictions and exit arrangements. The articles should mirror any provisions that need to bind future shareholders, because a shareholders’ agreement only binds its parties.
Investors also review intellectual property ownership, employment arrangements, material contracts, debt, disputes, data protection and regulatory matters. The company normally provides this information through a due diligence questionnaire and disclosure letter. Accurate disclosures qualify warranties in the investment agreement. Missing an important issue does not remove it from the business, so founders should build the disclosure process around the records investors will actually examine.
Before completion, the parties should agree the final documents, evidence of SEIS or EIS eligibility where relevant, board and shareholder resolutions, updated articles, subscription funds and Companies House filings. After completion, update the statutory registers, issue share certificates, maintain the cap table and file the return of allotment. The company should also diarise investor reporting dates and any consent requirements for future fundraising, acquisitions or changes to the business.
The practical test is consistency. The term sheet, subscription agreement, shareholders’ agreement, articles and cap table must describe the same transaction. Founders should resolve inconsistencies before signing, particularly around valuation, voting thresholds, investor protections and the treatment of employee options. A short, well-organised document set reduces delays in the angel round and gives the company a clearer base for its next funding stage.