Last reviewed 29 August 2026
An equity funding round is a documented transfer of ownership and control. However friendly the relationship with the investor, the process involves diligence, negotiation of protective rights and a set of corporate steps that must be executed in the right order.
The work divides into three phases: preparation before the term sheet, negotiation and diligence, and completion and filings. Founders who prepare phase one well typically complete faster and on better terms, because diligence findings are the main source of price and warranty pressure.
This guide sets out the sequence and the documents involved in a typical UK seed or Series A round.
Before the term sheet: get the house in order
Assemble a clean data room: certificate of incorporation, current articles, statutory registers, board and shareholder minutes, cap table with a fully diluted view, any existing shareholders' or investment agreements, option scheme documents and grants, and all Companies House filings up to date.
Then the commercial layer: key customer and supplier contracts, employment and contractor agreements with IP assignments, IP registrations, insurance, property documents, data protection documentation and management accounts. Chase missing signatures now — an unsigned contractor IP assignment discovered in diligence can hold up completion for weeks.
The term sheet
Term sheets are mostly non-binding, but they set expectations that are difficult to move later. The key economic terms are pre-money valuation, investment amount, option pool size and whether it sits pre- or post-money, and any liquidation preference — a 1x non-participating preference is the standard UK position.
The key control terms are board composition, investor consent (reserved) matters, information rights, anti-dilution protection, and founder vesting or lock-in. Binding provisions usually include exclusivity, confidentiality and costs. Negotiate the option pool and preference carefully: both have more effect on founder outcomes than headline valuation.
Due diligence
Expect legal, financial, technical and commercial diligence proportionate to the round size. Legal diligence focuses on title to shares, IP ownership chain, material contracts, employment status, disputes, data protection and regulatory compliance.
Answer completely and consistently. Diligence responses feed into the disclosure letter, which qualifies the warranties you will give — a properly drafted disclosure is your main protection against a warranty claim, so treat it as a substantive document rather than an administrative one.
The completion documents
A typical round involves a subscription (or investment) agreement containing warranties and completion mechanics; amended and restated articles carrying share rights, pre-emption, drag and tag; a shareholders' agreement or the equivalent provisions inside the subscription agreement; a disclosure letter; board minutes approving the transaction; shareholder resolutions to adopt new articles and disapply pre-emption; and a service agreement or updated employment contract for each founder.
Where SEIS or EIS relief is in play, the share rights must remain compliant — no preferential dividends, no redemption rights, ordinary shares fully paid in cash. Check this against the final articles rather than the draft that went to HMRC for advance assurance.
Completion and filings
On completion, funds are transferred, shares are allotted by board resolution, share certificates are issued and the register of members is updated. File the SH01 return of allotment at Companies House within one month, the new articles within 15 days of the resolution adopting them, and update the register of people with significant control if control has shifted.
Complete the statutory books properly. Registers are the primary evidence of title, and gaps in them are a recurring diligence finding at the next round or on exit.
After the round
Investors typically require monthly or quarterly management accounts, an annual budget approved by the board, and notification of material events. Board meetings become a real governance rhythm rather than an annual formality, with proper agendas, papers and minutes.
Reserved matters now apply. Build the list into your internal approval process so consents are obtained in advance rather than ratified after the fact. And keep the cap table current — including option grants, exercises and lapses — because the next round starts from it.
Key points
- Diligence readiness, not valuation, is the usual cause of delay.
- Option pool sizing and liquidation preference affect founder outcomes more than headline valuation.
- The disclosure letter is your key protection against warranty claims.
- Check final articles against SEIS/EIS conditions before completion.
- File SH01 within one month and new articles within 15 days.
- Embed reserved matters into your internal approval process post-closing.
Frequently asked questions
- Is a term sheet binding?
- Mostly not, other than specific clauses such as exclusivity, confidentiality and costs, which are usually expressed to be binding. Commercially, though, agreed terms are very hard to renegotiate later.
- What is a liquidation preference?
- A right for investors to be paid a defined amount from exit proceeds before other shareholders. A 1x non-participating preference means the investor takes the higher of their money back or their pro-rata share — the standard UK position.
- Should the option pool be pre- or post-money?
- Investors usually require it pre-money, meaning the dilution falls on existing shareholders. It is a negotiable point with real economic effect, so model the fully diluted outcome before agreeing.
- How long does a round take?
- From signed term sheet to completion, four to eight weeks is typical for a seed round where diligence materials are ready. Gaps in the corporate record are the most common cause of a longer timetable.