A funding round generates a cascade of documents, each depending on the last. The term sheet sets the terms. The shareholders' agreement (SHA) formalises them. The subscription/share purchase agreement (SPA) executes the share transfer. Board resolutions authorise the issuance. Companies House filings make it official. And the cap table records the result. If any step is missed, delayed, or incorrectly recorded, you have a mess that costs thousands in legal fees to clean up. This guide walks through the complete workflow — every document, every signer, every step.
The document chain
| Step | Document | Signers | Binding? |
|---|---|---|---|
| 1 | Term Sheet | Company + Lead Investor | Mostly non-binding (except exclusivity, confidentiality) |
| 2 | Due Diligence disclosure | Company provides; investor reviews | Disclosure letter is binding |
| 3 | Shareholders' Agreement (SHA) | All shareholders (existing + new) | Fully binding |
| 4 | Subscription Agreement / SPA | Company + each new investor | Fully binding |
| 5 | Board Resolution | All directors | Required for share allotment |
| 6 | Share Certificates | Company secretary / director | Statutory requirement |
| 7 | Companies House filings (SH01, updated articles) | Company secretary / director | Statutory requirement |
| 8 | Cap Table Update | Founder / admin | Internal record — must match filings |
Step 1: Term sheet
The term sheet is typically 3-8 pages and outlines the key commercial and legal terms of the investment. It is usually non-binding (meaning either party can walk away) except for specific clauses like exclusivity and confidentiality.
Signers: CEO/founder and lead investor. If there are multiple investors, only the lead investor signs the term sheet — other investors rely on the lead's negotiated terms.
Workflow: Sequential — founder signs first (confirming they agree to the terms), then investor counter-signs.
Step 2: Due diligence
After term sheet signing, the investor conducts due diligence. This is where your deal room earns its keep. The investor (or their lawyers) will review your corporate documents, financial records, IP assignments, employment agreements, and any material contracts.
The output of this phase is a disclosure letter — a document where the company formally discloses any exceptions to the warranties it gives in the SHA. The disclosure letter is signed by the founders and attached to the SHA.
Step 3: Shareholders' Agreement
The SHA is the most complex document in the round. It governs the relationship between all shareholders — existing and new. It covers:
- Board composition and voting rights
- Reserved matters (decisions requiring investor consent)
- Anti-dilution protections
- Pre-emption rights on future share issues
- Drag-along and tag-along rights
- Founder vesting and leaver provisions
- Information rights and reporting requirements
Signers: Every shareholder (existing and new), plus the company. For a seed round with 2 founders and 3 investors, that is 6 parties signing the same document.
Workflow: Hybrid — company signs first, then all investors sign in parallel.
Step 4: Subscription Agreement
The subscription agreement (or share purchase agreement) is the transactional document — it says "Investor X subscribes for Y shares at £Z per share, for a total of £W." There is typically a separate subscription agreement for each investor, though they may be identical except for the amount.
Signers: Company + individual investor (for each agreement).
Workflow: Parallel — all subscription agreements are sent simultaneously to all investors.
Step 5: Board resolution
The board must formally resolve to allot the new shares. This is a written resolution signed by all directors. It authorises the company to issue the shares specified in the subscription agreements.
Timing: This must be signed before the shares are actually issued. It is often signed on the same day as the SHA and subscription agreements (the "completion date").
Steps 6-8: Post-completion
After all agreements are signed and funds are received:
- Issue share certificates: Each new shareholder receives a share certificate showing their holding.
- File with Companies House: File SH01 (return of allotment) within one month. Update the articles of association if needed (new share classes, updated authorised share capital).
- Update the cap table: Record the new shares, calculate updated ownership percentages, and reflect the new option pool if one was created or expanded.
Where things go wrong
- SHA signed but subscription agreements not completed: The investor relationship is formalised but no shares have been issued. This creates a limbo state.
- Board resolution missing: Shares are issued without board authorisation. This makes the allotment voidable.
- Companies House filing delayed: The round is complete but CH records do not match reality. This causes problems at the next round.
- Cap table not updated: The founder's internal records show different ownership than what is filed. Due diligence for the next round will flag this.
- Old SHA not properly superseded: The new SHA should replace the old one. If it does not, there are conflicting agreements.
How a unified platform prevents these problems
When your e-signatures and cap table are on the same platform, the workflow becomes a guided process:
- Send the term sheet for signing → track its status
- Share the deal room → monitor investor engagement
- Send SHA and subscription agreements → manage multi-party signing
- Sign the board resolution → link it to the share allotment
- Update the cap table → auto-calculate new ownership from signed agreements
- All documents stored together, linked to the round, with complete audit trails
First-time founders
If this is your first funding round, the document chain can feel overwhelming. The key is to work through it sequentially — do not try to sign everything simultaneously. Each step builds on the last. And get a startup-experienced lawyer to review the SHA — it governs your company for years.
Run your round from one platform
eSignHub connects your deal room, document signing, and cap table — so your funding round flows from term sheet to close without anything falling through the cracks.
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