Private Equity & Venture Capital
Private Equity is the term used for investment from a private firm into another company. Venture Capital also works in a similar way but they will have different preferences for the size, type and nature of company they are investing in.
Private Equity and Venture Capital firms often have strict rules that companies need to adhere to if they want to take investment and so the drafting of the legal documents is complex and comprehensive work. Herrington Carmichael have a large team of lawyers who have expertise in dealing with private equity firms and venture capital funds.
Our expertise extends to navigating the intricate regulatory landscape for private equity and venture capital houses and their investors. We assist in establishing tax-efficient funds, collaborating with tax advisors to devise structures that align with contemporary practices in private equity.
In the UK, Private Equity (PE) and Venture Capital (VC) investments necessitate careful consideration of various regulatory factors to ensure adherence to local laws and regulations. Consideration of these UK-specific regulatory factors is crucial for successful PE and VC investments, especially when engaging with entities like NS&I. Collaborating with legal professionals well-versed in the UK regulatory landscape is essential to navigate these complexities effectively. Here at Herrington Carmichael, we have the necessary skills and experience to assist you completing these types of transactions successfully and efficiently.
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Frequently Asked Questions
Find answers to your most pressing questions about our services and processes.
Why choose private equity over debt funding?
Funding from a private equity or venture capital investor will always be conditional upon their taking an equity stake in the company. The provision of funds can come with access to stronger management and opportunities to maximise expertise and grow the business itself. The key advantage compared to debt is that the other shareholders are not liable to repay the investor in the event that the company is not profitable and their return will generally be limited to the exit proceeds which are available. Please get in touch if you are considering funding options.
What are some of the key legal issues?
Some of the key legal issues include:
- Extensive due diligence from the investor firm
- Structure of equity provisions dealing with dividends, preference shares, capital returns, controls and voting rights
- Whether warranties and disclosures are required
- Structure of the consideration to be paid
What controls will an investment fund require?
The nature of the controls will depend on the nature of the business and the amount of investment. Generally, investment funds will require a seat on the board of directors as well as negative controls on the company issuing new shares, altering the share rights, making any constitutional changes, limiting the amount of debt or liability the company can incur. In order to monitor the specific controls an investment fund will require, there are often many information obligations and a detailed business plan which will need to be adhered to.
Will we need a shareholders' agreement?
Most private equity or venture capital firms will insist upon a shareholder or investment agreement setting out the relationship between the parties and any controls they want to instil on running the company. As the articles of association are a public document, it will be appropriate to include certain provisions in the separate investment agreement, such as warranties on the current position of the target, mechanisms for warranty claims and limitations on such claims. Please get in touch to find out more.