Essential Legal Documents for Capital Raising
The process of raising capital involves a sequence of legal steps and documentation to secure funding, issue new shares, and formalise the relationship with new investors.
Define the Deal (Term Sheet): The process begins with a non-binding Term Sheet that outlines the core commercial agreement, including valuation, investment amount, and key investor rights.
Authorize the Issuance (Resolutions): The company must pass formal Board and Shareholder Resolutions to legally approve the investment, the increase in share capital, and the waiver of pre-emption rights by existing shareholders, which results in their share dilution.
Execute the Purchase (Subscription Agreement): The new investor legally commits to buying the shares, and the company commits to issuing them, through the primary contract called the Share Subscription Agreement.
Govern the Future (Shareholders' Agreement): A Shareholders' Agreement is signed by all parties (founders, existing shareholders, and new investors) to define the long-term governance, transfer restrictions, and investor protective rights.
Finalise Compliance (Statutory Filings): The process concludes with the transfer of funds, the update of internal Statutory Registers, and the filing of a Return of Allotment Form with the government registry to legally reflect the new ownership structure.
Examples of Documents for Capital Raising:
Term Sheet – Outlines key investment terms like valuation and rights.
Resolutions – Board and shareholder approvals for funding and share changes.
Subscription Agreement – Investor commits to buying shares from the company.
Shareholders’ Agreement – Defines governance and rights among all shareholders.
Statutory Filings – Updates registers and files allotment forms post-investment.
Fund Transfer – Completes payment and records ownership changes officially.
