Once you've found a limited company to invest in, the next step is to complete the legal work required. So what's involved? Generally the process is as follows (where company refers to the company receiving investment):
- Agree the terms of investment, and make a contract / shareholders agreement based on this.
- Check through the company's Articles and Memorandum of Association.
- The company should pass an ordinary resolution issuing new share capital if the company does not have enough unallocated shares to complete the desired transaction.
- All parties sign the contract, and then the investor and investee should swap any monetary consideration for a share certificate.
- Finally, the company should inform Companies House of the updated share structure by filling form 123 - increasing nominal share capital (if necessary) and form 88(2) - allocation of shares.
Contract / Shareholders agreement
The contract / shareholders agreement could include:
- Clarity on the ownership of assets. If any company assets are registered personally to the Directors, then they should be transferred to the new company.
- Pre-emption rights to take part in any new share issues on the same terms as other share holders.
- Commitment guarantees from the Directors, e.g. they will work on the project for at least x months, or will relinquish some shares as a penalty if they wish to leave early.
- Details of when the investor expects to be able to take a dividend, e.g. the current Shareholders / Directors can take a remuneration package of up to £x per year, after which the investor may take a dividend.
- Full disclosure of all company assets and liabilities.
Web Filing with Companies House
WebFiling is a secure and reliable way to file your company information. As well as saving you money on your Annual Return (£15), WebFiling allows you to file most of your company information free of charge. This includes changes to your registered office address (form 287) director and secretary changes.
To use Web-Filing you need to follow 2 steps.
- Register for a web filing account, and a security code - this will be emailed to you.
- Apply for an authentication code. A company may already have one if it was set up online, otherwise it will be sent out by post to the registered address.