Sifted asked leading startup lawyers what one legal issue they would advise founders to consider early. London partner Robbie McLaren offered the below:
The key issue for a startup is to look very carefully at what consent or veto rights you give to investors. Think very carefully before you restrict your ability to raise new money.
"It is a tale of woe I hear from companies probably once a month, they find themselves unable to raise new funding because one of the shareholders will not agree," McLaren says.
"A professional VC will not usually do this, but if your investor is your mum's second cousin's best mate - you might have to look very carefully at the terms."
Once you are in a situation where a shareholder is refusing to give consent, the options are pretty unpalatable, says McLaren. You can offer the shareholder money to persuade them to agree, or you might be able to get them out of the contract - but this is complicated and expensive. The only other option - if no agreement can be reached - is to wind up the company or walk away. Not a great result.
