'Back to work' and 'across my desk' come instructions from a range of my business clients interested to explore prospectively accepting relatively modest cash sums for share based investments from business angel investors.
The common problem they seem to be experiencing is a reluctance upon the investor's part to commit (in principle), and without that commitment - the company seeking investment is reluctant to undertake the legal and administrative work necessary to prepare appropriate draft legal documentation with the aim of completing the share based investment (in a manner likely to be satisfactory to all interested parties).
The heads of terms set out below are designed to assist companies seeking investment by helping them to reach a 'subject to contract' commitment in principle from their prospective business angel investor(s).
Anyone desiring more detailed terms (particularly if you are - or represent - the prospective investor) should feel free to contact me - but sometimes, what's required is a first K.I.S.S. (= 'Keep It Simple Stupid'!)
Dan.Johnson@EquitableLaw.com / +44 (0) 7788 537 18
[INVESTEE COMPANY] LIMITED
(Company Number [XXXXXXXX])
Registered Office : [Address]
Trading Address : [Address]
[Name of Investor]
By Email
……… [September] 2014
Dear [Name of Investor],
Proposed investment of [X] Hundred Thousand Pounds (£[x]00,000) in the share capital of [Investee Company] Limited (Company) by way of subscription for ordinary shares in the share capital of the Company
Further to our recent discussions, these heads of terms set out the principal terms and conditions on, and subject to which an associated entity which you represent and whose details we would appreciate you clarifying by completing relevant details in due course (Investor) is willing to invest in the Company, subject to agreement and signing by all relevant parties of appropriate investment documentation.
For the avoidance of doubt, these heads of terms are not exhaustive and are not, and are not intended to be, legally binding except as specifically set out below.
1. INVESTMENT
1.1 The proposed investment (Investment) will be made on a basis which will represent (post investment) a [fifteen] per cent. ([15]%) equity shareholding for the Investor in the Company.
1.2 The Investment will be made in the form of ordinary shares which will the same rights as the other shares in the Company.
1.3 The Investment will be made in full at completion.
1.4 The Investment will be used for the Company's on-going working capital requirements (including such specific purposes as we may agree with you as part of the investment process).
2. CONDITIONS
The Investment is to be conditional upon us agreeing to such reasonable additional requirements in relation to aspects and issues as you may request of us as part of the investment process.
3. TERMS OF INVESTMENT
The Company and each of the existing shareholders (Founders) will agree to incorporate such additional terms as the Investor may reasonably require.
4. CONFIDENTIALITY
4.1 The matters contemplated by these heads of terms are to be treated as confidential and should not be disclosed to any person (except with the prior written consent of the other party).
4.2 The Investor undertakes that it will not disclose or make use of for its own benefit (or for the benefit of any associated person), any of the information of a confidential nature relating to the Company which has been disclosed to it during the course of the investment process or otherwise in connection with the proposed investment.
5. FEES AND EXPENSES
Each party shall bear its own costs incurred in connection with the proposed Investment.
6. EXPIRY OF OFFER
The offer set out in these heads of terms is open for acceptance until close of business on [Friday, 19th] [September] 2014, failing which it shall lapse.
7. GOVERNING LAW AND JURISDICTION
7.1 Paragraphs 4 to 7 are intended to be legally binding.
7.2 These heads of terms and any dispute or claim arising out of or in connection with them or their subject matter or formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with the law of England and Wales.
Please sign and return a copy of these heads of terms as soon as possible to confirm your agreement to the above.
Yours faithfully
................................................................
[Full Name]
Director, Duly authorised for and on behalf of the Company and the Founders
We hereby acknowledge receipt and confirm our acceptance of the contents of these heads of terms
Signed .....................................................
Duly authorised for and on behalf of the Investor
Date ........................................................ 2014
Investor Details (for inclusion in the share register of the Company)
Full Name (Please PRINT) : ………………………………………………...
Correspondence Address :
………………………………………………….
………………………………………………….
………………………………………………….
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