Practical Advice for Introducing New Investors into a Small-Medium Business

Relevant For:

Business owners considering expansion and bringing in new investors, including key employees.

Key Points:

  • Assess if your current structure supports expansion; consider transitioning to a company or unit trust.
  • Ensure financial statements are clear and separate business from private expenses.
  • Decide between transferring shares or issuing new shares; understand the tax implications.
  • Carefully introduce equity to employees; consider starting with a bonus or phantom equity scheme.
  • Create a governance agreement covering decision-making, trigger events, valuation, funding, and dispute resolution.
  • Applying thorough diligence can improve business value and investor appeal.

Full Article:

At some point in a business owner’s journey, the idea of expansion arises. Whether seeking capital for growth, incentivising key employees, or bringing in an expert stakeholder, the commercial motives vary, but the legal, tax, and duty considerations are often similar. Here’s how to navigate these complexities effectively.

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