Updating a shareholders agreement after new investment

A new investor changes the cap table, the classes of share, the thresholds for every decision and the order in which money comes out, and the shareholders' agreement the founders signed before the round was written for a company that no longer exists. Updating it means recalculating every consent threshold for the new holdings, adding the investor's rights without giving away the founders' control, aligning the leaver and vesting provisions with what the investor requires, and replacing the old agreement cleanly so that nobody is bound by two. I draft the updated agreement for all the shareholders 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; where the investor's lawyers insist on their own document, I review it for the founders instead.

Who this is for

Founders and existing shareholders in England and Wales who have taken or are taking investment from an angel, a syndicate, a corporate or a fund, and incoming investors who want one agreement that works for everyone.

What matters in updating a shareholders' agreement after investment

Why the old agreement does not survive the round

The existing agreement binds its signatories and nobody else, so the new investor is not bound by it and has no rights under it; its thresholds (a majority of the founders, three quarters by shares) were set for holdings that the round has changed; its reserved matters do not include the investor's consent; and its drag-along, tag-along and leaver provisions do not address the investor's shares or class. Most agreements provide that they can be amended by a stated majority with each affected party's consent, and the round is the occasion to do so by a new agreement signed by everyone, with the old one terminated expressly, because an old agreement left in force alongside a new one produces two sets of rules.

The investor's terms and what the founders keep

An investor will require consent rights over a list of matters, information rights, a board seat or observer, anti-dilution or pre-emption on new shares, founder vesting and leaver provisions, warranties from the founders, and drag-along at a threshold it can influence, and the updated agreement should give the investor those rights in a form the founders can live with: consent matters confined to what could damage the investment, a board the founders still control, vesting with credit for time served, warranties within a cap, and a drag threshold that needs the founders' support; founders who understand what each term does negotiate better than founders who sign the term sheet's summary.

Consent thresholds recalculated for the new holdings

Every threshold in the agreement should be recalculated against the new cap table on a fully diluted basis: the majority for ordinary decisions, the threshold for reserved matters, the investor majority where the investors act as a class, the drag-along threshold, and the percentage below which a shareholder's special rights fall away; a threshold copied from the old agreement can give the investor a veto nobody intended or deny the founders a majority they thought they had, and the briefing session should walk through each with the new numbers.

Classes, preferences and the waterfall

Where the investor takes a separate class of shares with a liquidation preference, a preferred dividend, anti-dilution protection or weighted votes, the articles create the class and the agreement should state how the classes interact: the waterfall on a sale or winding up (the preference returned first, then the ordinary shares, with or without participation), the voting on class matters, the conversion of preferred shares, and the effect on tax reliefs the investor claims under the Income Tax Act 2007, which preferential rights can disqualify; the founders should see the waterfall worked through at several exit values, because a preference that looks modest at one valuation takes most of the proceeds at another.

Leaver provisions, the pool and the next round

The investor will require founder vesting and good and bad leaver terms, usually tighter than the founders' own, and the updated agreement should align the founders' existing vesting with the investor's requirements (credit for time served, acceleration on a sale), create or enlarge the option pool under the Enterprise Management Incentives scheme in Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003 with the dilution agreed, and provide for the next round: the investor's right to participate, the founders' and investor's pre-emption under section 561 of the Companies Act 2006, and the agreement's own replacement when the next investor arrives.

The mechanics of replacing one agreement with another

The new agreement should be signed by every shareholder and the company, should terminate the old agreement and release the parties from it (save for accrued rights), should be accompanied by the special resolution adopting new articles under section 21 of the Companies Act 2006 with the class rights and transfer provisions the new agreement needs, by the share issue to the investor with the authority to allot under section 551, and by the Companies House filings, and should contain a deed of adherence for shareholders who join later; the note on the articles sets out the changes, and amended articles are quoted separately or, where the investor's lawyers draft them, reviewed for the founders.

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

Our investor's lawyers have sent an investment agreement and new articles. Do we still need you?

To review them for the founders, yes: the thresholds, the consent matters, the vesting, the warranties and the waterfall decide what you keep. Where the investor is content for one agreement to be drafted for everyone, I draft it jointly instead.

Can we keep our old shareholders' agreement and just add the investor?

Only by amending it with everyone's consent and the investor signing a deed of adherence, which rarely fits because the thresholds and the classes have changed. A new agreement that terminates the old one is cleaner.

The investor wants a liquidation preference. What does that do to us?

It returns the investor's money first on a sale or winding up, before the ordinary shares share the rest, and depending on the terms it may also participate in the rest. The agreement works the waterfall through at several exit values so that you can see the effect.

Related guidance and services

• Shareholders agreement, £995, the service this page describes
• Contract review, £495
• Employment contracts and handbooks, £595
• Shareholders agreement when bringing in an angel investor
• Shareholders agreement versus articles of association

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.