Shareholders agreement when bringing in an angel investor

An angel investor puts money into a company run by its founders and wants, in return, a say on the things that could lose it, information about how it is going, and a way out when the company is sold. The founders want the money without losing control of the business, and both sides usually want the investment to qualify for the tax reliefs that make angel investing worthwhile, which constrain what the agreement can give the investor. I draft the shareholders' agreement for the founders and the investor together, with a briefing session and a note on how it fits the articles, for a fixed fee of £995, delivered in five working days.

Who this is for

Founders in England and Wales raising a first investment from an individual investor, and angel investors investing in a company whose founders have asked for a short set of documents rather than an institutional term sheet.

What matters in an angel investment shareholders' agreement

What the investor is buying and the financial promotion rules

The agreement should state the number and class of shares the investor subscribes for, the price and the resulting percentage, and the mechanics of issue (board and shareholder resolutions, the authority to allot under section 551 of the Companies Act 2006, disapplication of pre-emption under section 561 where needed, the share certificate and the Companies House filing); before any of that, inviting someone to invest is a financial promotion restricted by section 21 of the Financial Services and Markets Act 2000 unless an exemption in the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 applies, such as those for certified high net worth individuals and self-certified sophisticated investors, and the founders should have the investor's certification before the pitch rather than after.

The investor's consent rights and information

An angel usually receives a list of matters the company may not do without the investor's consent (issuing shares, changing the articles, selling the business, borrowing above a limit, changing the nature of the business, paying founders above a stated level, transactions with founders), information rights (management accounts quarterly, annual accounts, notice of material events), and sometimes a board seat or an observer right; the agreement should give the investor protection on the matters that could damage their investment and leave the founders running the company, because an angel who must be consulted on hiring is a drag on the business they invested in.

Founder commitments, vesting and leaver terms

The investor is backing the founders, and the agreement should record each founder's commitment (full time, no competing interests, a service agreement), restrictive covenants, and vesting of the founders' shares so that a founder who leaves early does not keep their full holding, with good and bad leaver terms, a valuation for vested shares and compulsory transfer provisions in the articles; the founders should expect it, because without it the investor is funding a founder who can leave with half the company the week after the money arrives.

Warranties and what the founders stand behind

The investor will ask the founders and the company to warrant the state of the business (the accounts, the IP, the contracts, litigation, the information provided), and the agreement should contain warranties limited to matters the founders can stand behind, qualified by a disclosure letter, capped at the investment amount or lower for the founders personally, with a time limit for claims; founders giving unlimited personal warranties to an angel have taken on more than the investment is worth, and investors asking for them are rarely serious about enforcing them.

Tax reliefs and the terms they allow

Most angels invest under the Seed Enterprise Investment Scheme or the Enterprise Investment Scheme in Parts 5A and 5 of the Income Tax Act 2007, and the conditions constrain the agreement: the investor must hold full-risk ordinary shares without preferential rights to dividends or assets on a winding up, must not be connected with the company in ways the rules prohibit (an employee, or a director other than as the rules permit), and the shares must be held for the qualifying period; anti-dilution protection, preference shares, guaranteed returns and redemption rights can all put the relief at risk. The agreement is drafted to be consistent with the reliefs the parties intend to claim, and the company's accountants confirm the advance assurance and the conditions.

Exit, drag-along and the next round

The agreement should provide drag-along at a threshold the founders can meet so that a sale the founders and a majority accept takes the angel with it, tag-along so that the founders cannot sell control without the angel being bought out on the same terms, the investor's right to participate in the next round to maintain their percentage, and a recognition that the next round's investors will require the agreement to be replaced by their own documents; it should also address the relationship with the articles under section 33 of the Companies Act 2006, with the note on the articles saying what changes are needed and amended articles quoted separately.

What it costs

Shareholders agreement, £995. An agreement between the shareholders of a private company, with a note on how it interacts with your articles. Five working days.

Buying online forms the engagement on payment. The scope is what the shareholders agreement page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• A briefing session with all shareholders together, to work through the questions people avoid asking each other
• A shareholders agreement drafted for your actual situation rather than a precedent with the names changed
• A note on how the agreement interacts with your articles, and whether the articles need amending to make it work
• A plain English explanation of every material choice, so nobody signs something they have not understood
• One round of amendments
• Signature-ready documents

What is not included

• Acting for individual shareholders separately, because I act for you jointly
• Company valuation
• Tax structuring, which needs your accountant and should run alongside this
• Amended articles of association and IP assignments, which I quote separately
• Filing at Companies House
• Resolving a dispute that has already started

Questions I am often asked

Can we give the angel preference shares?

Not if they want SEIS or EIS relief, which require ordinary shares without preferential rights. The agreement is drafted to be consistent with the relief; the accountants confirm the conditions and the advance assurance.

What should the angel be able to veto?

The decisions that could damage the investment: new shares, changing the articles, selling the business, major borrowing, founder pay and transactions with founders. Not the hiring and the day-to-day, which the founders run.

Do we have to give personal warranties?

Founders usually warrant the information given and the state of the company within a cap and a time limit, qualified by disclosure. Unlimited personal warranties are more than an angel investment justifies, and the agreement limits them.

Related guidance and services

• Shareholders agreement, £995, the service this page describes
• Contract review, £495
• Employment contracts and handbooks, £595
• Shareholders agreement for a friends and family investment round
• NDA for an investor conversation

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: October 2026. Email geoffrey@caesar.co.uk.