Fundraising

Fundraising: Why Should You Consult a Lawyer?

• 1. Strategic Legal Advice

  • Structuring the Deal: A lawyer can advise on the best legal structure for the fundraising round (e.g., equity issuance, convertible loans, bonds) based on the company's objectives, the type of investors targeted, and the industry.

  • Investment Terms: Lawyers help you understand and negotiate the terms of the investment, such as investor rights (e.g., voting rights, control rights, and exit conditions).

  2. Drafting and Negotiating Legal Documents

  • Legal Documentation: Fundraising involves drafting important legal documents like subscription agreements, shareholders' agreements, investment contracts, and financing clauses. A lawyer ensures these documents are properly prepared and legally sound, protecting the company's interests.

  • Negotiating Terms: When agreeing with investors, it's essential to negotiate terms (valuation, equity stakes, voting rights, etc.). A skilled lawyer will protect your interests during these negotiations and avoid potential legal pitfalls.

  3. Legal and Regulatory Compliance

  • Regulatory Compliance: Fundraising is subject to a complex legal framework, including financial market regulations, investor protection laws, securities regulation, and tax compliance. A lawyer helps you navigate these rules to prevent costly mistakes or sanctions.

  • Corporate Governance: It’s crucial to comply with corporate governance rules, particularly regarding the management of shares and the rights of existing shareholders.

  4. Protecting Founders’ Interests

  • Power Balance: In fundraising, external investors may acquire significant control in the company. A lawyer can guide you on how to maintain a balance of power and ensure that the founders retain significant control.

  • Intellectual Property Protection: Investors often want to ensure key assets, such as intellectual property (patents, trademarks, software), are protected. A lawyer ensures that these assets are properly transferred or secured if needed.

  5. Due Diligence

  • Preparing for Due Diligence: Investors will conduct a thorough due diligence process, reviewing the legal, financial, and operational aspects of the business. A lawyer can help you prepare for this phase, ensuring the company is presented in the best light and minimizing surprises.

  • Risk Management: Lawyers also identify potential legal risks that might arise during due diligence and help you address them before they become an issue with investors.

  6. Securing Investor Confidence

  • Investor Assurance: A lawyer plays a key role in reassuring investors by ensuring the business’s legal documents are in order and the financing structure is secure.

  7. Tax Advice

  • Tax Optimization: A specialized lawyer can advise on the tax implications of the fundraising round, both for the business and for investors. They can also guide you on favorable tax regimes depending on the type of financing chosen.