Raising funds is a crucial milestone for any start-up, but navigating the legal landscape can be complex. From structuring investment agreements to ensuring compliance with regulatory requirements, start-ups must have a solid legal foundation in place. This guide outlines the key legal steps every start-up should take when preparing for fundraising.
Investment Agreements Explained: A Guide for Start-Ups
An investment agreement is a legally binding document that outlines the terms under which an investor provides funding to a start-up. These agreements cover important elements such as share allocation, voting rights, investor protections, and exit strategies.
Key considerations include:
Share structure: How will equity be distributed?
Investor rights: What level of control will investors have?
Exit strategies: How can investors sell their shares in the future?
Compliance requirements: Are you adhering to UK financial regulations?
Having a well-drafted investment agreement is crucial for avoiding disputes and protecting both founders and investors.
Legal Advice for Start-Up Investors & Founders
Both investors and founders need to understand the legal implications of fundraising. Key areas include:
Employment law advice: Ensure your contracts and option schemes comply with employment laws.
EMI scheme explained: If offering EMI options, make sure they are structured correctly for tax efficiency.
Legal assistance for due diligence: Investors will scrutinise your company’s financial and legal records before committing funds.
Fractional GC support: Many start-ups benefit from fractional general counsel, who provide expert legal guidance without the cost of a full-time lawyer.
Getting expert legal counsel early can save start-ups from costly legal issues down the road. If you need professional legal advice, Seven Legal specialises in providing tailored support for start-ups at every stage of their growth.
If you’d like to discuss your legal needs, get in touch with our team at Seven Legal.
Author: Bill Cogan
Bill is a dual-qualified lawyer, licensed in both England & Wales and New York, with a Master's degree from the University of California, Berkeley. As the founder of Seven Legal, Bill delivers practical, commercially focused legal advice to high-growth tech companies and their investors.
Seven Legal provides stage specific legal advice for fast growth technology companies. Built on advising hundreds of founding teams in the UK, US and India with funding, scaling and exiting high growth ventures, our expert tech lawyers will be a growth enabler for your business.
