For founders and startups
The documents you sign when you set up the company or take investment decide who controls it, what happens to your shares if you leave and who gets paid first on a sale. They are hard to change later. Upload a shareholders’ agreement, investment agreement, loan or IP assignment and get a plain English report on what it means for you, for £49 + VAT.
The situations people are usually in when they send us a contract.
An angel or fund is ready to invest and has sent a 30-page shareholders’ agreement, probably alongside new articles of association and a subscription or investment agreement. It mentions drag-along, anti-dilution, investor consents and leaver provisions. The review explains each of these and how they change your position.
You agreed an equal split over a coffee and incorporated the company, but there is no shareholders’ agreement and the articles are the standard model articles. If one of you leaves in six months, nothing obliges them to give back any shares. A shareholders’ agreement with leaver provisions, and ideally vesting, deals with that while everyone is still getting on.
Someone close to you is lending the company money to get started. The loan agreement should say how much, what interest is charged, when it must be repaid, what happens if a payment is missed, and whether it can convert into shares. Check whether you are being asked for a personal guarantee, which puts your own assets at risk if the company can’t pay.
If you wrote code or created designs before the company existed, you own them personally, not the company. Investors will expect the company to own its core IP, which means a written assignment from each founder. The review checks that the assignment covers what it needs to and flags any warranties you are giving about it.
An experienced adviser is joining in return for shares or options and perhaps a fee. The agreement should set out what they will do, how their equity is earned over time, what happens if they stop helping, and who owns their work. The review checks it protects the company as well as the adviser.
Every clause rated for your side, in plain English, usually within ten minutes of paying.
Read a complete sample reportDrag-along and tag-along, investor consent rights, board seats, pre-emption and transfer restrictions, in plain terms
How your shares are earned, what happens if you leave, and how good and bad leaver prices are set
Liquidation preferences, anti-dilution protection and the warranties founders are asked to give
How the deal changes your shareholding and which decisions you can no longer make without investor consent
Repayment, interest, default, conversion rights and any personal guarantee you would be giving
Specific clauses that look off-market or one-sided, with suggested changes
A drag-along lets holders of a set majority force the remaining shareholders to sell on the same terms when they accept an offer for the company. That is normal and buyers expect it. The risk is a low threshold that lets one investor trigger it alone, no minimum price, or terms that make dragged shareholders give the same warranties and indemnities as the sellers who negotiated the deal. Check the threshold, and ask that dragged shareholders receive the same price and form of consideration and give only limited warranties, such as title to their own shares.
Leaver clauses usually require a departing founder to sell their shares back. A good leaver might get market value for vested shares, while a bad leaver might get the lower of market value and what they paid, which for a founder is often close to nothing. Look at how “bad leaver” is defined. If it includes resigning for any reason, or being dismissed without any fault on your part, that is harsher than it needs to be.
A liquidation preference decides who gets paid first on a sale or winding up. A 1x non-participating preference lets the investor take either their money back or their percentage share, whichever is higher. A participating preference lets them take their money back and then share in what’s left as well. On a modest exit, that difference can change what founders receive substantially, so run the numbers at a few realistic sale prices.
If the company later raises money at a lower price per share, anti-dilution protection gives the protected investor extra shares, and the cost falls on the shareholders who don’t have it, usually the founders. A broad-based weighted average formula shares that burden more fairly. A full ratchet reprices the investor’s shares entirely to the new lower price and is much harsher.
£49 + VAT per contract. No subscription and nothing to sign up for first.
PDF or Word. Add a line of context if it helps, such as when they want it back.
In about 30 seconds, an overall rating and the headline concerns, before you pay anything.
Usually about ten minutes. Emailed as a PDF with a link to read it online.
Sign it, send back the changes, or take it to a solicitor knowing which clauses to raise.
Anything else, get in touch.
The articles of association are the company’s constitution under the Companies Act 2006. They are filed at Companies House and are public. A shareholders’ agreement is a private contract between the shareholders and usually the company. Investors normally want both, and key terms such as leaver provisions, drag-along and share transfer rules often appear in the articles as well, so read them together.
Founders usually own their shares outright from the start, so UK vesting normally works in reverse: if you leave early, you must sell back some or all of your shares under the leaver provisions, and the proportion you keep grows over time. Four years with a one-year cliff is common, particularly in venture-backed companies, but it is a convention, not a rule. Founders often negotiate credit for time already spent building the business, and accelerated vesting on a sale.
It protects an investor if a later round is priced lower than theirs, by giving them extra shares or converting their shares at a better rate. The cost of that falls on everyone without the protection, which usually means the founders. A broad-based weighted average version is widely seen as reasonable. A full ratchet is much more aggressive and worth resisting.
Investment agreements usually ask the company, and often the founders personally, to confirm facts about the business: its accounts, contracts, IP, employees and any disputes. Anything that isn’t accurate should be disclosed against the warranties in a disclosure letter. Check whether your personal liability is capped, whether there is a time limit for claims, and whether you are liable jointly with the other founders for each other’s share.
It is strongly advisable. Without one, you are left with the articles and the Companies Act 2006, which say nothing about what happens to a departing founder’s shares or how deadlock is broken, and give only limited control over who shares can be transferred to. A founders’ shareholders’ agreement signed early, while everyone agrees, is much easier than one negotiated after a fall-out.
Paste it in and say which side you’re on. You get a rating, what the clause does and what you might ask for instead. It’s free, with a daily limit.