Founder FAQs
Plain-English answers to the legal questions UK founders ask, from incorporation and cap tables to SEIS, EMI options, term sheets and exits.
General information for UK founders, not legal advice. For advice on your own situation, speak to a solicitor.
Closing the round
- What is a data room and what should be in it?
- What is a disclosure letter?
- What happens at completion of a funding round?
- Who pays the legal fees in a funding round?
- What board and shareholder resolutions does a funding round need?
- What are warranties in an investment agreement?
- How do I issue new shares in a UK company?
- What are pre-emption rights - and how are they disapplied?
- What documents do I need to close a seed round in the UK?
- How long does a seed round take to close?
- What is an SH01 and when must I file it?
- What is due diligence - and what will investors ask for?
Company setup & structure
- Can I change my company's articles after incorporation?
- What is a confirmation statement and when do I file it?
- What are directors' duties under the Companies Act 2006?
- How many shares should I issue when incorporating a UK startup?
- Ltd vs LLP - which is right for a startup?
- Should I use model articles or bespoke articles of association?
- What nominal share value should a startup use (£0.001 vs £1)?
- What is a PSC and who counts as one?
- What address can I use as my registered office?
- Do I need a shareholders' agreement as a solo founder?
- Can I use a company name similar to an existing business?
- Can I be the sole director and shareholder of my startup?
- Can I start a startup while employed full time?
- What legal documents does a UK startup actually need?
Cross-border & visas
- What is a Delaware flip and does my UK startup need one?
- Innovator Founder visa vs Global Talent visa - which fits startup founders?
- Can non-UK investors claim SEIS or EIS relief?
- Can a non-UK resident be a director of a UK company?
- Raising from US VCs as a UK company - what changes in the documents?
- How does my startup get a sponsor licence to hire international talent?
- Can US investors invest in a UK limited company?
Disputes & problems
- What happens if we breach an investment warranty?
- What can I do if my co-founder stops working but keeps their shares?
- What should I do if a competitor is using our confidential information?
- A customer won't pay an invoice - what are my legal options?
- Can I fire a co-founder who is also an employee?
- Can an investor back out after signing a term sheet?
- How should I handle a legal letter or threat against my startup?
- What protection do minority shareholders have (unfair prejudice)?
- How do I remove a co-founder or director legally?
- What is shareholder deadlock and how do I avoid it?
Co-founders & equity
- How do I add a new co-founder after incorporation?
- Should advisors get equity - and how much?
- Can we buy back shares from a co-founder who has left?
- What is a cap table and how do I keep it clean?
- Can a co-founder work for equity only, without a salary?
- What happens to a co-founder's shares if they leave?
- What is a deed of adherence?
- How should co-founders split equity in a UK startup?
- What is founder vesting and how does it work in the UK?
- Founders' agreement vs shareholders' agreement - what's the difference?
- What is a founders' agreement and do we need one?
- What are good leaver and bad leaver provisions?
- What is reverse vesting?
- What should a shareholders' agreement include for a UK startup?
- How much equity should a startup CTO get?
- What is a vesting cliff?
Fundraising instruments
- What is an advance subscription agreement (ASA)?
- Why do ASAs have a six-month longstop date?
- ASA vs convertible loan note - what's the difference?
- ASA vs SAFE - which should UK startups use?
- How do a discount and a valuation cap work together in a convertible?
- What is a down round and what does it trigger?
- What is a priced round vs a convertible round?
- Can I raise money from friends and family legally?
- Can a UK company use a SAFE?
- What should a UK seed-stage term sheet include?
- What is a SeedFAST and how does it compare to a standard ASA?
- What is a side letter in a funding round?
- What is a subscription (investment) agreement?
- What is a term sheet - and is it legally binding?
- What is a valuation cap and how does it work?
Growth, Series A & exits
- What are accelerator terms like - and should I sign them?
- What are the BVCA model documents?
- What are directors' duties when a startup is running out of money?
- What is an earn-out in an acquisition?
- What happens to employee options when a startup is acquired?
- What legal prep does a startup need before an exit?
- What is a founder secondary and when can I sell some of my shares?
- How do liquidation preferences play out in an exit waterfall?
- What happens to SEIS/EIS investors in an exit?
- What extra due diligence do institutional VCs run at Series A?
- How is a Series A different from a seed round legally?
- What is a share purchase agreement (SPA)?
- Share sale vs asset sale - what's the difference for founders?
- How do I shut down a startup properly (strike-off vs liquidation)?
Investor terms
- What is anti-dilution protection and how does it work?
- What are drag-along and tag-along rights?
- What founder protections should I negotiate in a term sheet?
- What are information rights?
- Should I give my investor a board seat?
- What is a liquidation preference?
- What is a no-shop (exclusivity) clause in a term sheet?
- Should the option pool come out of pre-money or post-money?
- Ordinary shares vs preference shares in UK startups - what's the difference?
- Participating vs non-participating liquidation preference - what's the difference?
- Pre-money vs post-money valuation - what's the difference?
- What are pro-rata rights?
- What is a ratchet?
- What are reserved matters (investor consent rights)?
- What is a warrant and why do accelerators use them?
IP & brand
- Who owns the code if an agency built my MVP?
- Do I own my company name by registering it at Companies House?
- Who owns the IP my employees and contractors create?
- What is an IP assignment agreement and when do I need one?
- Are NDAs enforceable in the UK - and are they worth it?
- How do I transfer pre-incorporation IP into my company?
- Who owns copyright in software in the UK?
- Can I patent software in the UK?
- What can I do if someone copies my product or brand?
- What IP protection does an early-stage startup actually need?
- Should I file a trademark before or after launch?
- How do I trademark my startup name in the UK?
Product, data & privacy
- What should B2B SaaS terms of service include?
- What are the rules for marketing to consumers vs businesses?
- Can I send cold emails under UK GDPR and PECR?
- Do I need a cookie banner on my website?
- What is a data processing agreement (DPA) and when do I need one?
- Do I need a data protection officer (DPO)?
- Are e-signatures legally valid in the UK?
- Does my startup need to register with the ICO?
- Can I transfer user data outside the UK?
- What is a master services agreement (MSA)?
- Does the Online Safety Act apply to my app or platform?
- What happens if my startup has a data breach?
- Do I need terms and conditions and a privacy policy for my startup?
- What does UK GDPR require from an early-stage startup?
Raising rules, crowdfunding & promotions
- Can I publicly advertise that my startup is raising money?
- Do angel syndicates need FCA authorisation?
- What is a nominee structure in crowdfunding?
- How does equity crowdfunding work legally in the UK?
- What is a financial promotion and when do the rules apply to founders?
- Who counts as a high-net-worth or sophisticated investor?
- Can anyone invest in my startup, or are there investor eligibility rules?
- What are the legal risks of pitching my raise on LinkedIn or social media?
SEIS & EIS
- How long does SEIS advance assurance take?
- Do ASAs and convertible notes qualify for SEIS/EIS?
- What is EIS and how does it work?
- Can founders or directors claim SEIS relief on their own shares?
- Can my company lose SEIS/EIS status after the investment?
- Can I claim R&D tax relief and SEIS at the same time?
- What is the risk-to-capital condition?
- Can I raise under SEIS and EIS at the same time?
- How do I get SEIS/EIS advance assurance?
- Which trades are excluded from SEIS and EIS?
- Is my startup eligible for SEIS?
- What happens to SEIS relief if my startup fails?
- SEIS vs EIS - what's the difference?
- What is SEIS and how does it work?
- What are SEIS1 and SEIS3 forms?
Share options & EMI
- Can contractors or advisors receive share options?
- What is a CSOP and when does it beat EMI?
- Who is eligible for EMI options?
- What exercise price should EMI options have?
- When must EMI option grants be notified to HMRC?
- What is an EMI share option scheme?
- What is an EMI valuation and how do I get one?
- EMI vs unapproved options - what's the difference?
- What vesting schedule should employee options have?
- What are growth shares?
- How big should a startup option pool be?
- What is a section 431 election and why does the 14-day deadline matter?
- How do I set up an EMI scheme?
- What happens to share options when an employee leaves?
Software, AI & open source
- Who owns AI-generated code or content?
- What should an AI product's terms of service cover?
- Do I need an AI use policy for my startup?
- MIT vs Apache vs GPL - what do the licences mean for startups?
- Can I legally use open-source code in my commercial product?
- Can I use OpenAI or Anthropic APIs and stay UK GDPR compliant?
- Can I train an AI model on customer or user data?
- Is web scraping legal in the UK?
Team, hiring & employment
- What should an advisor agreement include?
- How do I legally dismiss an employee in a UK startup?
- Do startups need an employee handbook or staff policies?
- Employee vs contractor - what's the legal difference (and where does IR35 fit)?
- What must a UK employment contract include?
- Do I need a consultancy agreement for a fractional CTO?
- Can I hire someone before the company is incorporated?
- How do I hire my first employee in the UK (legal checklist)?
- Are non-compete clauses enforceable in the UK?
- What notice period should startup employment contracts use?
- Can I pay someone in equity instead of salary?
- What are a startup's pension auto-enrolment duties?
- How do probation periods work legally in the UK?
- What is a settlement agreement?
- When do employees get unfair dismissal rights in the UK?
- Do I have to give employees a written contract by law?
Working with lawyers
- How do I choose a startup lawyer in the UK?
- What legal work can founders safely DIY?
- Fixed fee vs hourly - how should startups buy legal work?
- Do I need a lawyer for my seed round?
- Can I use legal templates instead of a lawyer?
- What questions should I ask a lawyer before hiring them?
- How much do startup lawyers cost in the UK?
- Legal template platforms vs a solicitor - what's the real difference?
- What is a term sheet review and is it worth it?
- When should a startup first speak to a lawyer?
