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Equity Financing Agreement for the United Kingdom

Equity Financing Agreement Template for England and Wales

An Equity Financing Agreement under English and Welsh law is a legally binding document that establishes the terms and conditions under which an investor provides capital to a company in exchange for equity ownership. The agreement details the investment amount, share class, valuation, investor rights, and various protections for both parties. It incorporates key provisions required by UK company law and financial regulations, including necessary corporate approvals and compliance with FCA requirements.

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What is a Equity Financing Agreement?

The Equity Financing Agreement is essential for any company seeking to raise capital through the sale of equity shares in England and Wales. This document is typically used during funding rounds, from seed investments to later-stage financing, and must comply with the Companies Act 2006 and relevant FCA regulations. The agreement covers crucial aspects such as share valuation, investor protections, voting rights, and exit provisions, while ensuring compliance with UK corporate and securities laws. It serves as the primary document establishing the relationship between investors and the company.

What sections should be included in a Equity Financing Agreement?

1. Parties: Identification and details of all parties to the agreement including the company, investors, and any other relevant stakeholders

2. Background: Context of the investment, including company status, purpose of investment, and relevant history

3. Definitions: Comprehensive list of defined terms used throughout the agreement

4. Investment Terms: Detailed terms of the investment including amount, share class, price per share, and payment mechanics

5. Conditions Precedent: Prerequisites that must be satisfied before completion of the investment

6. Completion Mechanics: Step-by-step process for completing the investment, including timing and deliverables

7. Warranties: Representations and warranties from the company and founders regarding business status and operations

8. Board and Voting Rights: Governance provisions, voting arrangements, and board composition requirements

What sections are optional to include in a Equity Financing Agreement?

1. Anti-dilution Protection: Provisions protecting investors from dilution in future funding rounds, typically included for institutional investors

2. Tag-Along Rights: Rights allowing minority shareholders to join in the sale of shares by majority shareholders

3. Drag-Along Rights: Provisions enabling majority shareholders to force minority shareholders to join in a company sale

4. Employee Share Option Pool: Framework for establishing and maintaining an employee share scheme

What schedules should be included in a Equity Financing Agreement?

1. Capitalization Table: Detailed breakdown of current and post-investment share ownership structure

2. Warranties Schedule: Comprehensive list of warranties given by the company and founders

3. New Articles of Association: Revised company constitution incorporating new investor rights and share classes

4. Disclosure Letter: Document containing exceptions and qualifications to the warranties

5. Board Resolutions: Corporate approvals required to implement the investment

6. Shareholders' Agreement: Detailed agreement governing relationships between shareholders post-investment

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

England and Wales

Publisher

Ƶ

Document Type

Finance Agreement

Cost

Free to use
Relevant legal definitions











































Clauses

































Industries

Companies Act 2006: Primary legislation governing company formation, operation, and management, including share capital rules, directors' duties, pre-emption rights, and registration requirements

Financial Services and Markets Act 2000 (FSMA): Regulates financial services industry, including financial promotion restrictions, regulated activities, and investor protection provisions

Financial Services Act 2012: Updates to financial regulations and financial conduct requirements, complementing FSMA

FCA Regulations: Financial Conduct Authority rules covering investment requirements, financial promotion rules, and conduct of business standards

UK Listing Rules: Rules applicable for listed companies, covering disclosure requirements and corporate governance standards

Enterprise Investment Scheme (EIS): Tax relief scheme rules for investments in qualifying companies, affecting equity investment structure

Seed Enterprise Investment Scheme (SEIS): Tax relief scheme for early-stage company investments, relevant for seed-stage equity financing

UK Corporate Governance Code: Best practice recommendations for corporate governance and company management

Market Abuse Regulation (MAR): Regulations preventing market abuse and ensuring market integrity

PSC Regulations: People with Significant Control regulations requiring disclosure of individuals with significant control over companies

Income Tax Act 2007: Tax legislation affecting individual investors and investment schemes

Corporation Tax Act 2010: Corporate tax legislation affecting company structure and investment returns

Stamp Duty Regulations: Rules governing stamp duty and stamp duty reserve tax on share transfers and issuances

Money Laundering Regulations 2017: Requirements for preventing money laundering and terrorist financing in financial transactions

Employment Rights Act 1996: Employment law considerations for equity arrangements involving employees

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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