Who pays the legal fees in a funding round?
By SuLe · Updated 11 July 2026
There is no legal rule — who pays is a matter of negotiation and market practice. At seed, each side commonly bears its own legal costs. Institutional investors more often ask the company to contribute to their legal fees, typically as a capped amount. The two things worth insisting on are a hard cap and a completion condition.
Key facts
- Who pays legal fees is market practice, not a legal requirement — it is negotiated deal by deal.
- At seed, each side commonly bears its own costs.
- Institutional investors often negotiate a company contribution to their legal fees, typically capped.
- Any contribution is commonly a few thousand pounds at seed, with larger sums more typical at Series A.
- Always cap the contribution and make it conditional on completion.
Is there a rule about who pays?
No. Nothing in law dictates who covers the legal costs of a funding round; it is entirely a matter of negotiation, shaped by market convention and the relative bargaining power of the two sides.
That said, conventions exist. At seed, each side commonly pays its own way — the company instructs its solicitor, the investor instructs theirs, and each foots their own bill.
Because it is negotiable, it is worth raising early, ideally in the term sheet. A fee arrangement agreed up front is far less contentious than one that surfaces as a surprise line item near completion.
When does the company pay the investor's fees?
The more you move towards institutional money, the more likely the company is asked to contribute to the investor's legal costs. Institutional and lead investors often negotiate a company contribution to their fees as a term of the deal.
Where a contribution is agreed, it is commonly a capped amount — typically a few thousand pounds at seed, with larger figures more usual at Series A. Treat any specific number as negotiable rather than fixed.
The logic, from the investor's side, is that the company benefits from the investment and should share the transaction cost. The founder's job is not to resist the idea outright but to keep it bounded.
How do I keep the fee contribution under control?
Two protections do most of the work: cap it, and condition it on completion. A hard monetary cap turns an open-ended promise into a known, limited number, so the investor's costs can never become your unlimited liability.
Making the contribution conditional on completion means you only pay if the round actually closes. Without that condition, a deal that collapses late could leave you covering the other side's bill for a transaction that never happened.
In practice the agreed contribution is often netted off the investment at completion — you receive the round amount minus the contribution. That is normal, but it reduces the cash you actually bank, so build it into how much you set out to raise.
| Scenario | Who commonly pays | Founder's protection |
|---|---|---|
| Seed, angel-led | Each side its own costs | Agree it in the term sheet |
| Seed, institutional lead | Company contributes to investor fees | Cap it; condition on completion |
| Series A | Company contribution more typical, larger | Hard cap; completion condition |
| Deal falls through | Depends on the wording | Completion condition means you pay nothing |
Worked example
Yusuf and Clara raise a £500,000 seed for Marrow Bio Ltd from an institutional fund. The fund's term sheet asks the company to cover its legal fees. Left open, that could be a large, uncertain bill.
Their solicitor negotiates a contribution capped at a modest few thousand pounds and conditional on completion, netted off the investment. When the round closes, the company receives £500,000 minus the agreed contribution, and knows the exact figure in advance. Because the cap is hard and tied to completion, there is no scenario where the fund's costs balloon or where Marrow Bio pays anything if the deal had collapsed.
Where founders go wrong
Assuming the split is fixed
— who pays is negotiable market practice; raise it in the term sheet rather than accepting a late demand.Agreeing an uncapped contribution
— without a hard cap, the investor's legal costs become your open-ended liability.Leaving out the completion condition
— if the deal falls through, an unconditional promise can leave you paying for a round that never closed.Forgetting it reduces your cash
— a contribution netted off the investment shrinks what you actually bank, so factor it into the raise amount.
Related questions
Does the company always pay the investor's legal fees?
No — this is market practice, not a rule. At seed, each side commonly bears its own costs. Institutional investors more often ask the company to contribute to their legal fees, typically as a capped amount. Whether there is any contribution at all, and how large, is a point to negotiate rather than assume.
How big is a typical company contribution to investor fees?
It varies, and there is no fixed figure. Where a company does contribute at seed, the amount is commonly capped at a few thousand pounds, with larger contributions more typical at Series A. Treat any number as negotiable and always insist on a hard cap rather than an open-ended commitment. [More: How much do startup lawyers cost in the UK?]
How do I stop the fee contribution running away?
Cap it and make it conditional on completion. A hard monetary cap stops the investor's costs becoming your open-ended liability, and a completion condition means you only pay if the deal actually closes — so you are not left covering the other side's bill for a round that fell through.
Can the fee contribution just come out of the money raised?
Often it is netted off the investment at completion, so the company effectively receives the round amount minus the agreed contribution. That is normal, but it means the contribution reduces the cash you actually bank, so factor it into how much you need to raise rather than treating it as free.
Legal fees are a negotiable term dressed up as a formality, and an uncapped, unconditional contribution can quietly cost you thousands on a deal that might not even close. A SuLe solicitor can negotiate the fee terms and keep any contribution capped and conditional. Book a free investment readiness check
Keep reading: How much do startup lawyers cost in the UK? · Do I need a lawyer for my seed round? · Fixed fee vs hourly — how should startups buy legal work? · What documents do I need to close a seed round in the UK? · What should a UK seed-stage term sheet include? · How long does a seed round take to close?
Primary sources: Companies Act 2006 · GOV.UK — Running a limited company
