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Issues to look out for
The big issue is founders come into it and think the headline is ‘I’m receiving £500,000 for 20% of my company and I want you as the lawyer to get the job done’. We will always get the job done because it is not difficult to get the documentation done surrounding a half-a-million pound investment for a certain percentage. That’s already agreed upon by the parties beforehand, what you are negotiating about is the terms that are attached to that and in particular the control that will be imposed on the founder and the decision-making responsibility and power that is given to someone else.
They are without doubt the two most common issues that come up in any founder investment and what we do is help the founder through that process, and help them understand what happens if heaven forbid they get booted out of their own company. That is always one of the hardest parts of a deal to explain to a founder is that there are provisions in the documents for what happens if they get booted out of their own company and what happens to their shares. Most founders say well obviously I am going to keep them and most investors will say no you won’t. If you do something bad and you lose your job you will probably lose your shares and negotiating that position from ‘I’m never going to lose control of my company’ to ‘this is actually necessary for the deal to get done’ is a tough job but it is one we do day in day out.
Brandsmiths is a trading name of Brandsmiths S.L. Limited which is authorised by the Solicitors Regulatory Authority, SRA No: 620298. Founding Partner: Adam Morallee
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