Corporate Finance, Funding and Private Equity
Tollers have significant experience of working with investors, investee companies and management teams in terms of financing transactions. This means we can proactively and pragmatically take you through the process.
Corporate Finance Funding and Private Equity Solicitors
The first legal step for such transactions is to reach agreement on a set of heads of terms which sets out key matters such as:
- the amount of investment;
- preferential dividends;
- rights of control;
- good/bad leaver;
- restrictive covenants;
- terms of engagement for owners/management team.
Once the heads of terms are agreed the investor will commence its commercial, financial and legal due diligence. Specific due diligence may also be carried out on key management.
Investment Agreement
There will then follow the investment agreement and new articles for the company. The investment agreement is the main contracting document and will contain a process for reaching important decisions in the company and the right for the investor to appoint a director and in some circumstances to control the board. The investment agreement typically contains warranties from the owners/management about the target company, its trade, ownership of assets, disputes, accounts and tax position. Expert advice on these warranties should be taken in order to ascertain whether the nature and extent of them are reasonable and appropriate and to ensure that generally accepted limitations on liability for a breach of warranty are included. The investment agreement will also contain certain restrictive covenants on the owners/senior management.
Articles Of Association
The new articles of association of the company will set out the rights of any new class of shares that the investor may take, and deal with a number of other matters:
- the investor will invariably take enhanced voting rights in certain situations;
- the rights of preference shareholders;
- a possible ratchet on an exit depending on price achieved;
- restrictions on allotment of new shares and transfer of issued shares;
- a mechanism to force other shareholders to offer their shares for sale in certain circumstances;
- drag and tag along rights on an ultimate exit.
The senior management may also be required to enter into new service agreements to cover remuneration, bonus schemes, share options, benefits and restrictive covenants if they leave the company.
Talk to Tollers
Our experience covers start up investment, private equity and growth investment, across a range of sectors.
