TRW & Co · Corporate & Commercial
Venture Capital Lawyers in London
Venture capital lawyers London founders and investors instruct negotiate the price, economics and control terms of each funding round and keep the company eligible for tax reliefs. From April 2026 EIS limits doubled and EMI was expanded to larger companies, changing the maths for many growth-stage rounds.
Key pointA preference or ratchet attached to investors' shares can disqualify them from SEIS or EIS relief, so rounds mixing angels and institutional funds often need separate share classes and carefully sequenced issues.
At a glance
EIS limits doubled
From April 2026 a company can raise £10m a year and £24m in total under EIS, or £20m and £40m if knowledge-intensive.
Gross assets test raised
The EIS and VCT gross assets limit rose to £30m before and £35m after the share issue, except for certain excluded companies.
EMI for larger companies
EMI is now available to companies with up to 500 employees and £120m gross assets, with £6m of options and a 15-year life.
SEIS for the earliest stage
SEIS lets young companies with gross assets up to £350,000 raise up to £250,000, with investors claiming up to 50% income tax relief.
SH01 within one month
After issuing shares, the company must file a return of allotment with Companies House within one month and update its registers.
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What venture capital work covers in England and Wales
Venture capital is equity investment in early-stage and high-growth private companies, usually in exchange for preferred shares and a package of investor protections. The venture capital lawyers London founders, angel syndicates and funds instruct work on every round, from a friends-and-family seed raise through Series A and later growth rounds to secondary sales and exit.
Each round is a negotiation over three things: price (the pre-money valuation), economics (liquidation preferences, anti-dilution and option pools) and control (board seats, consent rights and founder obligations). Terms agreed in an early round tend to be copied into later ones, so a poorly negotiated seed deal can shape the company's capital structure for years.
For UK companies, tax is never far away. SEIS and EIS reliefs determine whether many angels invest at all, and EMI options are the standard way to incentivise staff. Both regimes changed significantly from April 2026.
The legal and regulatory framework
Company law
A venture investment is a subscription for new shares in a private limited company under the Companies Act 2006. Directors need authority to allot shares, either under the Act's default rule for private companies with one class of shares or by shareholder resolution under section 551. Existing shareholders have statutory pre-emption rights under section 561, which are usually disapplied by special resolution and replaced by bespoke rights in the articles.
After the round, the company files a return of allotment (form SH01) with Companies House within one month, files the new articles and resolutions, and updates its register of members and register of people with significant control. Our guide to the PSC register explains when a new investor must be registered.
The deal documents
Most UK rounds use a subscription and shareholders' agreement plus new articles of association. The British Private Equity & Venture Capital Association (BVCA) publishes model documents that many investors use as a starting point. Using a familiar framework reduces cost, but every model contains choices that need negotiating.
Financial promotion rules
Inviting people to invest is a financial promotion under section 21 of the Financial Services and Markets Act 2000. Unless an authorised person approves the communication, the company must rely on an exemption, such as those for investment professionals, certified high net worth individuals or self-certified sophisticated investors. Pitch decks sent widely without checking the exemptions are a common compliance gap.
Tax reliefs from April 2026
The Seed Enterprise Investment Scheme (SEIS) lets a company with gross assets of no more than £350,000, fewer than 25 employees and no more than three years of trading raise up to £250,000, with investors claiming up to 50% income tax relief.
From April 2026 the Enterprise Investment Scheme (EIS) limits doubled: the annual company limit rose from £5m to £10m (£20m for knowledge-intensive companies), the lifetime limit from £12m to £24m (£40m for knowledge-intensive companies), and the gross assets test rose to £30m before and £35m after the issue. The higher limits do not apply to companies registered in Northern Ireland or trading in goods or electricity, which remain on the old limits.
EMI share options were expanded from the same date: the employee limit rose to 500, the gross assets limit to £120m, the company-wide limit on unexercised options to £6m, and the maximum option life to 15 years. Our guides to SEIS and EIS and EMI share options set out the conditions in more detail.
National security screening
The National Security and Investment Act 2021 requires mandatory notification of certain acquisitions of shares or voting rights in companies active in sensitive sectors, including artificial intelligence, advanced robotics, computing hardware, quantum technologies and synthetic biology. An investor crossing the relevant shareholding thresholds without clearance makes the acquisition void, so venture capital lawyers London investors use check NSIA exposure on every deep-tech round.
Key terms venture capital lawyers London founders and investors negotiate
The term sheet is non-binding on the commercial terms but sets the frame for the whole deal. Our venture capital term sheet guide walks through a typical one. The terms below do most of the work.
| Term | What it does | Founder-friendly position | Investor-friendly position |
|---|---|---|---|
| Liquidation preference | Decides who gets paid first on a sale or winding up | 1x non-participating | Multiple or participating preference |
| Anti-dilution | Protects investors if a later round is at a lower price | Broad-based weighted average | Full ratchet |
| Option pool | Shares reserved for employee incentives | Created after the round, diluting all | Created before the round, diluting founders only |
| Investor consents | Matters needing investor approval | Short list of fundamental matters | Wide list covering budgets, hires and spending |
| Founder vesting and leaver terms | What founders keep if they leave | Short vesting, generous good leaver definition | Long vesting, broad bad leaver definition |
| Drag-along | Forces minority to join a sale | High approval threshold and minimum price | Lower threshold, investor-controlled |
Price is not just valuation
A higher headline valuation paired with a participating preference and a full ratchet can leave founders worse off on exit than a lower valuation on clean terms. Model the waterfall at several exit values before signing the term sheet.
Control rights
Board seats, observer rights and investor consent matters decide who runs the company day to day. Founders should aim to keep consent rights to fundamental matters, such as new share classes, changes to the articles and sale of the business, rather than operational decisions.
The terms agreed at seed tend to become the floor for every later round. Negotiate them as if they will last until exit, because they often do.
Choosing the instrument: equity, ASA or convertible
Not every round is a priced equity round. Early-stage companies often use instruments that defer the valuation question, and venture capital lawyers London angels and seed funds instruct will usually start by asking which tax reliefs the investors need, because that narrows the choice.
- Priced equity round. Shares are issued now at an agreed valuation. Clear and EIS-compatible, but slower and more expensive to document.
- Advance subscription agreement (ASA). The investor pays now for shares issued at the next round, usually at a discount. ASAs can qualify for SEIS and EIS if drafted to HMRC's requirements, including a short long-stop date and no right to a refund or interest.
- Convertible loan note. A loan that converts into shares at the next round. Common for bridge financing, but generally not SEIS or EIS compatible because the investment is debt.
- US-style SAFE. Familiar to US investors, but the standard form does not suit UK tax reliefs and needs adapting for English law.
Venture debt, provided by specialist lenders alongside equity, can extend runway with less dilution, but carries covenants and security over the company's assets. Lenders often take warrants over shares as well, which need to be reflected in the cap table and in later anti-dilution calculations. Covenant breaches in a difficult trading period can hand the lender considerable leverage, so the financial covenants should be stress-tested against realistic downside forecasts rather than the business plan.
The process of a funding round step by step
- Prepare the company. Tidy the cap table, register IP in the company's name, check founder and employee contracts, and apply to HMRC for SEIS or EIS advance assurance if relevant.
- Agree the term sheet. Negotiate valuation, preference, anti-dilution, board composition, consents and option pool before lawyers draft the long-form documents.
- Due diligence. Investors review the data room: corporate records, IP ownership, key contracts, employment, data protection and disputes.
- Draft and negotiate documents. Subscription and shareholders' agreement, new articles, disclosure letter, board minutes and shareholder resolutions.
- Disclose against warranties. Founders and the company give warranties about the business; the disclosure letter limits liability for known issues.
- Complete. Pass resolutions, receive funds, issue shares and share certificates, and update the statutory registers.
- Post-completion filings. File SH01, new articles and resolutions at Companies House, issue SEIS or EIS compliance statements and grant EMI options where planned.
Bridge rounds, down rounds and exits
Not every round goes up. When a company needs cash before it can hit the milestones for a new priced round, it often raises a bridge from existing investors, usually through an ASA or a convertible loan note. The terms of the bridge, especially the conversion discount and any valuation cap, can shift value significantly between existing and new investors, so venture capital lawyers London boards rely on will check how the bridge interacts with the existing anti-dilution and pre-emption rights.
Down rounds
A down round, where new shares are issued at a lower price than the previous round, triggers anti-dilution protection for earlier investors and can wipe out much of the founders' and employees' equity. Directors must consider their duties under the Companies Act 2006, particularly where the company is close to insolvency and creditors' interests become relevant. A rights issue or pay-to-play structure, which offers all existing shareholders the chance to participate, can reduce the risk of later claims of unfair prejudice from shareholders who were excluded.
Secondaries and exits
Founders and early employees increasingly sell some shares to new investors in secondary transactions before an exit. These sales need consent under the articles, may trigger pre-emption and tag-along rights, and have their own tax consequences for the seller. On a trade sale, the drag-along, the liquidation preference waterfall and the treatment of unvested options decide who receives what. Venture capital lawyers London companies use will run the waterfall well before heads of terms are signed, so that management and investors are aligned. For a listing, see our IPO and equity capital markets page.
Documents and evidence to assemble
A well-organised data room shortens diligence and strengthens the founders' negotiating position. Venture capital lawyers London investors instruct typically expect the following.
- Corporate records. Articles, statutory registers, prior resolutions, Companies House filings and a fully reconciled cap table including options and convertibles.
- IP ownership. Founder IP assignments, employee and contractor IP clauses, registered rights and open-source software policies.
- Commercial contracts. Key customer, supplier and partnership agreements, especially those with change-of-control or exclusivity clauses.
- Employment. Contracts for founders and senior staff, option agreements, and right to work checks.
- Tax. SEIS or EIS advance assurance, prior compliance statements, EMI valuations and notifications, and R&D tax relief claims.
- Data protection. Privacy notices, records of processing and any data breach history.
- Financials. Management accounts, budget and the use-of-proceeds plan.
Risks and common mistakes
Losing SEIS or EIS relief through the round structure
SEIS and EIS shares must be ordinary shares without preferential rights to assets on a winding up and without certain preferential dividend rights. A liquidation preference attached to the investors' shares can disqualify them. Rounds mixing EIS and non-EIS investors often need separate share classes, careful drafting and correct sequencing of issues. Obtain advance assurance, check the articles against the conditions, and issue SEIS shares before EIS shares where both are used.
Ignoring the financial promotion rules
Sending a pitch deck or investment memorandum to people who do not fall within an exemption, without an authorised person's approval, can be a criminal offence and may make agreements unenforceable against the investor. Before circulating materials, confirm which exemptions apply, obtain the necessary investor statements and include the required wording. Crowdfunding platforms and syndicate leads operate under their own regulatory permissions.
Founder IP left outside the company
Code, designs and brands created before incorporation, or by contractors, belong to their creator unless assigned in writing. Investors will insist on fixing this before completion. A founder who has left on bad terms may refuse to sign or demand payment. Put written IP assignments in place at incorporation and in every employment and contractor agreement thereafter.
Unclear leaver provisions
Founder vesting and leaver clauses decide what happens to shares when a founder leaves, often at a fraction of market value for a bad leaver. Ambiguous definitions lead to disputes when relationships break down, sometimes ending in an unfair prejudice petition. Define good and bad leavers precisely, align them with service agreements, and consider the tax treatment of any forfeiture or compulsory transfer.
Missing an NSIA mandatory notification
Where the company is active in a sensitive sector, an investor acquiring a stake above the NSIA thresholds without clearance makes the acquisition legally void, and the parties may face penalties. Overseas investors, including those from the Gulf and China, are not singled out by the Act, but deep-tech rounds attract scrutiny. Check whether the company's activities fall within the mandatory sectors before agreeing timetables.
Before your next round, check whether the April 2026 changes have moved your company back within EIS or EMI. Companies that previously exceeded the old gross assets or employee limits may now qualify, which can make the round more attractive to angels and staff.
Cross-border venture investment: Bangladesh, the EU, the Gulf, Singapore and China
Venture rounds increasingly involve founders, investors or operations in more than one country, and venture capital lawyers London start-ups work with need to plan the holding structure early.
Bangladesh. Bangladeshi founders often set up a UK holding company to raise from international investors, with an operating subsidiary in Dhaka. Bangladesh's foreign exchange rules restrict outward investment by residents, so moving shares or IP offshore needs regulatory advice, and inbound investment must be documented for repatriation of returns. Our guide to a UK company for Bangladeshi founders covers the options, and our Dhaka office handles the local steps.
The EU. EU investors are familiar with UK terms, but EU subsidiaries bring local employment, data and option tax rules that need coordinating with UK EMI plans.
The Gulf. Sovereign and family office capital from the Gulf is an important source of growth funding. Expect detailed sanctions, anti-money laundering and, for sensitive sectors, NSIA analysis.
Singapore and China. Singapore is a common holding company location for South and Southeast Asian start-ups; flipping into or out of a UK structure has tax and IP consequences. Chinese investors in UK technology companies should expect NSIA scrutiny and may need approvals at home.
How venture capital lawyers London clients instruct at TRW & Co help
TRW & Co's London office is authorised and regulated by the Solicitors Regulation Authority. We act for founders, companies and investors, and coordinate with our offices in Dhaka, Singapore and Dubai on cross-border rounds.
Founder and company side
We review term sheets, model the impact of preferences and anti-dilution, and negotiate the subscription agreement, shareholders' agreement and articles to protect founders' control and economics.
Investor side
We conduct legal due diligence, negotiate protections and consent rights, and check SEIS, EIS, financial promotion and NSIA compliance before funds are committed.
Tax-advantaged structuring
We prepare advance assurance applications, structure share classes for SEIS and EIS, and set up EMI and other share incentive plans under the April 2026 limits.
Company preparation
We incorporate and restructure companies, fix cap tables and IP chains of title, and prepare data rooms, working with our company formation team.
Later-stage and secondaries
We advise on growth rounds, founder secondary sales, down rounds, venture debt and the transition to private equity ownership.
Exits
We run trade sales and prepare companies for listing, alongside our M&A and capital markets colleagues.
To see how this fits with our wider corporate offering, browse all our practices.
Checklist for decision-makers
- Is the cap table reconciled, including options, ASAs and convertible notes?
- Does the company own all its IP, with written assignments from founders and contractors?
- Has the waterfall been modelled at several exit values under the proposed terms?
- Do the share rights preserve SEIS or EIS eligibility, and is advance assurance in place?
- Has the company checked whether it now qualifies for EIS or EMI under the April 2026 limits?
- Are investor consent rights limited to fundamental matters?
- Are founder vesting and leaver terms precise and aligned with service agreements?
- Have the financial promotion exemptions been checked before materials are circulated?
- Is an NSIA mandatory notification needed for this investor and this company?
- Are Companies House filings, registers and compliance statements diarised for after completion?
To discuss a funding round, contact TRW & Co at Holborn Gate, 330 High Holborn, London WC1V 7QH, or email info@trw.co.
Frequently asked questions
01What does a venture capital lawyer do on a funding round?
A venture capital lawyer negotiates the term sheet, prepares or reviews the subscription and shareholders' agreement and new articles, runs or responds to due diligence, manages the disclosure letter against warranties, and handles completion and Companies House filings. For UK rounds they also check SEIS and EIS eligibility, financial promotion compliance and whether a National Security and Investment Act notification is needed. On the company side, they model how preferences and anti-dilution affect founders at exit.
02What is a liquidation preference?
A liquidation preference gives preferred shareholders the right to receive a set amount, usually their investment multiplied by a factor, before ordinary shareholders on a sale or winding up. A 1x non-participating preference returns the investment or lets the investor convert and share pro rata, whichever is higher. Participating preferences let the investor take both. The structure can significantly reduce what founders receive in a modest exit, and can affect SEIS or EIS eligibility.
03How did the April 2026 changes affect EIS?
From April 2026 the annual amount a company can raise under EIS rose from £5m to £10m, or £20m for knowledge-intensive companies, and the lifetime limit rose from £12m to £24m, or £40m for knowledge-intensive companies. The gross assets limit rose to £30m before and £35m after the share issue. Companies registered in Northern Ireland or trading in goods or electricity remain on the previous limits. The VCT income tax relief rate fell from 30% to 20%.
04Is an advance subscription agreement compatible with SEIS and EIS?
It can be. An advance subscription agreement lets an investor pay now for shares issued at a later round, usually at a discount. HMRC accepts ASAs for SEIS and EIS when they meet its requirements, including a short long-stop date for conversion, no right to a refund, no interest and no ability to vary or cancel. Convertible loan notes are debt and generally do not qualify. Get the drafting checked before funds are received.
05Can I send my pitch deck to anyone?
Not without care. A pitch deck inviting investment is a financial promotion under section 21 of the Financial Services and Markets Act 2000. Unless it is approved by an authorised person, it can only be communicated within an exemption, such as to investment professionals, certified high net worth individuals or self-certified sophisticated investors who meet the statutory conditions. Breaching the restriction can be a criminal offence and can make agreements unenforceable.
06Do venture investments need NSIA approval?
Some do. The National Security and Investment Act 2021 requires mandatory notification and approval before completion where an investor acquires shares or voting rights above specified thresholds in a company active in one of the sensitive sectors, such as artificial intelligence, computing hardware or quantum technologies. Completing a notifiable acquisition without approval makes it void. Many minority venture stakes fall below the thresholds, but the analysis should be done on every deep-tech round.
07What is founder vesting and why do investors require it?
Founder vesting means a founder's shares become fully theirs over time, often several years, rather than all at once. If a founder leaves early, unvested shares can be bought back, frequently at a low price if the founder is a bad leaver. Investors require vesting because they are backing a team; it protects the company if a founder departs. Founders should negotiate precise leaver definitions, acceleration on a sale and the tax treatment.
08Should a Bangladeshi start-up raise through a UK company?
Many do, because international investors are familiar with English law and UK tax reliefs such as EIS can apply to a UK company carrying on a qualifying trade. A UK holding company with a Bangladeshi operating subsidiary is a common structure. Bangladesh's foreign exchange rules restrict residents' outward investment, so transferring existing shares or IP needs regulatory advice and sometimes approval. TRW & Co coordinates the UK and Bangladesh steps.
Sources and official materials
- Companies Act 2006 — Share allotment, pre-emption and filings
- Financial Services and Markets Act 2000, section 21 — Restriction on financial promotion
- SEIS: apply to use the scheme (GOV.UK) — HMRC guidance on SEIS conditions
- Venture capital schemes: advance assurance (GOV.UK) — How to apply for SEIS and EIS advance assurance
- National Security and Investment Act 2021 — Mandatory notification in sensitive sectors
- BVCA — Industry body publishing model VC documents
General information only, current as at 21 October 2026. It is not legal advice and does not create a solicitor–client relationship. It reflects the law of England and Wales unless stated otherwise; Scotland and Northern Ireland have separate legal systems, and the law changes frequently. Check current official sources and take advice on the facts of your matter.