Getting Your Business Investor Ready

There may be a time in the life of your business when it needs to get Investor Ready. Perhaps you’ve already passed the startup stage and are now looking to scale up and take things to the next level. You’ve nailed your numbers, sweated over your ‘SWOT’ analysis, perfected your projections, buffed up your business case, vanquished your valuation and put it all together in a knock out ‘pitch deck’ ready for potential investors. While focussing on these critical things, don’t forget to review your general business documentation and put that in order.  In case there are things that need to be put right, it’s best to do this well ahead of time, and not leave it to the last minute. An operation’s documentation is a powerful indicator of the state of its underlying business: an up-to-date and well-drafted set of documents transmits a positive signal, documents in a lesser shape may paint a different picture.  A potential investor (or, see below, buyer) may want to carry out some due diligence on the business and well-crafted documents will instill confidence and help justify the valuation that you’ve applied. If you’re not seeking investment, but rather are looking to sell, the same principles will apply.  You’ll want to maximise the price by making the business look solid and well run. Again, a good set of documentation will assist. 

Are your template documents clearly drafted with any ambiguities removed?  Have all of the relevant contractual terms been properly committed to writing and do you have systems in place to ensure that insofar as possible your terms will prevail over those of your trading partners (to try and win any ‘battle of the forms’)? Do your documents reflect current law?  Do they contain appropriate limitations on your business’ liability to try and minimise exposure?  Limitation of liability, particularly in higher risk businesses, may be of particular interest to an investor or buyer. Are there any change of control clauses entitling a third party to terminate on a change in your business’ ownership, which need to be amended or eliminated?  Whilst perhaps less likely in an investment scenario (unless the investor is acquiring a majority stake), this could be a key issue if you’re looking to sell. And, of course, make sure that any website trading terms are up to scratch to properly showcase the business.   

Are your employment contracts, particularly any with key personnel, fully compliant?  Are they tight enough to protect your business, for instance do they contain effective non compete restrictions? If your business has acquired any other business in the past, are there any transfer of undertakings regulations applicable to any employees that you took on? In addition, would it be prudent to consider any necessary rationalisations of the workforce before any potential investment round or sale?   

Depending on the nature of your business, there could be significant value in your intellectual property. Perhaps it’s time to carry out an Intellectual Property ‘audit’to exactly establish what you’ve got. Have you duly registered any IP rights that are capable of registration?  Is documentation in place to ensure that all appropriate IP rights vest in your business, rather than in the individuals creating it? Also, make sure that you’re fully GDPR compliant, it’s big news these days.    In addition to the above, there may be other things that you need to look at, for instance, you might want to check that your constitutional documents and Companies House filings are up-to-date and that your property documents are in order. When getting investor, or sale, ready, it’s worth taking that extra time to check the state of your documentation, and give it a polish.

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The author of this article is expert LawBrief Hugh Mulley. Hugh Mulley is a City trained corporate and commercial solicitor with over 20 years’ experience acting for clients across the business spectrum. He has a background in major London Law Firms, including a period of 4 years working as a lawyer in the Middle East, and was head of the corporate commercial group at a leading Hertfordshire Law Firm.