In an earlier article setting out how angel investors can invest in your business, we looked at the rules governing investment, what to include in your deck and different valuation methods. We will now turn to consider what legal documents your business needs to formalise the investment.

Term Sheet

You and your angel investors may negotiate a Term Sheet or choose to reduce to writing the essential commercial terms. A Term Sheet is briefer and may not be legally binding, or may be subject to conditions like satisfactory due diligence.

Share Subscription Agreement

Following the investment’s confirmation, it is prudent to have each investor sign a Share Subscription Agreement. In short, each investor’s share subscriptions ‘vest’ on a particular date (e.g. end of the month) or subject to the business raising a minimum amount.

Shareholders Agreement or Deed of Accession

Shareholders Agreement will comprehensively outline the agreement between the Company and each investor regarding how the business will run. It includes:

  • Which shareholders can appoint a director,
  • Directors meetings,
  • Quorum for a directors’ meeting,
  • Which decisions need a simple majority or a higher majority to agree,
  • What shareholders can vote on,
  • Rules around issuing new shares,
  • Rules around one shareholder selling their shares, and
  • Dispute Resolution mechanisms.

Shareholders Agreement Negotiations

Experienced angel investors will seek specific clauses to protect their rights as a minority shareholder. These will include:

  • The right to appoint a director and to have a seat on the Board of Directors.
  • Certain decisions will require a unanimous vote of directors, meaning that the minority Director can block Director’s decisions they do not agree on.
  • Certain decisions will require a unanimous vote of shareholders, meaning that the minority shareholder can block shareholder’s decisions that they do not agree on.
  • A right of first refusal to buy shares if there is a new share issue so that they maintain the same percentage.
  • Tag along rights so that they can sell their shares at the same price as the majority shareholders if the majority shareholders sell out.


LegalVision’s corporate and commercial lawyers have considerable expertise in helping companies negotiate and agree with investors, and in advising investors. We have assisted many companies and investors, and we would be delighted to answer any of your questions. Please get in touch on 1300 544 755.

Ursula Hogben
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