Exit StrategyLegalUncategorized

What are the main legal considerations when I get an investor on board? – StartupSmart

There are so many issues that arise in this situation, that it is certainly worthwhile getting the help of an external professional – who will have been through the exact same process many times before.


That said, you don’t want to give them a blank cheque, so you need to do plenty of homework yourself first, to narrow down the amount of external assistance you need.


In terms of the most important things you need to agree commercially with the investor before putting pen to paper, here is my top three:


1. Financial commitment – what is the maximum commitment to be expected from all parties, whether cash or “in kind”? When and how will these contributions be called for?


Also, what are the repercussions if someone doesn’t provide what they have committed to?


2. The exit strategy – if someone wants to leave the business, are they able to get their money out, and, if so, what are the processes and timelines for doing this?


It’s essential that you ensure that the departure doesn’t “kill” what might otherwise still be a viable business.


3. Decisions, decisions, decisions – you need to set out a clear list of what decisions you can make as “general manager” of the business and what decisions need to be made by the board (which will presumably include the investor).


You should also decide which of these decisions can be made by a simple majority, and which ones require either a unanimous decision or perhaps more than 80% of shares.

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