‘Getting ready for investment’ : Legal pitfalls, making yourself attractive to an investor, due diligence on the investor & planning your exist strategy’
The panel will be moderated by Karen Holden , the Founder of A City Law Firm, a Legal 500 firm awarded The Most Innovative Law Firm, London.
Speakers & Agenda
Karen Holden – Commercial Solicitor & founder ‘Avoiding Legal Pitfalls & Getting investment ready’
Tim Stovold - Partner & Head of Tax -Kingston Smith ‘Making yourself attractive for investment such as EIS/SEIS
Benjamin Ayres – Founder of Bagboard leading tech company, in its third round of successful investment ‘How to choose the right investor’
Jackie Watts – Head of Commercial Law- A City Law Firm ‘Planning your exit strategy and protecting IP’
Questions for the Panel will follow their 10 minute presentations
‘Getting ready to scale-up and seek investment’
On your journey to expansion – is your house in order? & what will an investor or funder expect to see?
Common mistakes that a business makes when starting out need to be resolved before approaching the investor?
The biggest issue for many businesses is:
- Failing to get the right advisors on board at an early stage. A good lawyer and accountant should save you money in the long run;
- Not having tailored, up to date and transparent legal documents;
- Not properly considering the company structure;
- Not protecting its Intellectual Property; and
- Not protecting itself with solid employment & sub-contractor contracts.
Whilst you may have been trading for some time or have a product ready to launch an investor will want to know that your “house is in order” and that you have spent money wisely in protecting the business and considering these essential elements.
A City Law Firm: Check List
What do you need to have in place to show the investor that you are a secure bet?
- Business Plan/ Shareholders Agreement: You should, if you have not done so already, agree terms with your co-founders in writing. This agreement is your platform to develop and convince investors you have set achievable goals and you are all in sync with the transaction.
- Company Structure: Some businesses which are set up for tax efficient purposes, for example by adding their wives/husbands/partners or creating complex structures and trusts, but these can cause issues and confusion later down the line with incoming investors. However, some companies do not consider the benefit of tax efficient opportunities such as EIS structures or R & D reliefs that their investors could benefit from.
- Consumer/Client conditions: Sounds obvious but it is usually the one thing that is done using a template or is out of date. As you expand or move into territories outside of the UK these can cause tremendous problems. There are many rules when contracting with consumers which can cause significant problems (including criminal liability and unenforceable terms) if not included. An investor will want to see a copy of your terms. This is an investors safety net, as it is yours, so it must be comprehensive.
- Intellectual Property Protection: This is a valuable asset for most businesses and an investor will want to see your IP portfolio and be clear you own this IP outright.
- Lack of Employment and Contractual Documentation : this can cause a business significant harm and an investor will want to see you have taken all steps to secure the business from competition and confidentiality breaches . If an employee leaves with confidential information or clients and sets up in competition or worse holds details of your IP this is going to damage your company.
- If you are securing investment do not get pressured into making the wrong decision.
Any investor will seek to add in their own terms and will have their own objectives for your business so you must all be clear about what you want so to try and minimise the risk of a dispute between the shareholders at a later point.
Do you own the IP :
If you have hired a person or company to create your IP and/or products it is vital that you have a detailed and protective agreement in place. If your employees create the IP during the course of their employment this will almost always automatically be your property, but you should ensure these provisions are outlined in their employment contracts for added protection..
Meet different advisors; explore all the options; understand what is available and what each practically will mean for you. What may appear too restrictive to a lawyer or accountant may still be worth the risk to your expansion, on the other hand what may appear a dream offer could come with too many strings – juggle advice against what you need carefully.
You do not have to give control of your company away. If you are concerned about giving shares away consider there are other options available to you such as:
- Bank loans with low interest rates which are presently available;
- Debt financing such as corporate bonds;
- EIS/ SEIS as tax incentives for investors
- Joint venture agreements
- Government and social grants
- Tax reliefs
- Other investments