Home » Investing in a Company

Company Investment

How is investing in a company different from buying shares?

When an investor invests in a company, the company issues new shares to the investor in exchange for the investment.  Usually, the investment is for cash paid into the capital of the company, however, it is possible to have non-cash investment.  Assuming cash is paid, it is paid to the company itself, and the shares are issued to the investor who becomes a shareholder in the company.

When buying shares from an existing shareholder, the buyer still becomes a shareholder of the company, however instead of paying the investment to the company, the purchase price for the shares is paid to the shareholder selling the shares.

This page deals with investment into a new company.

How to invest in a company?

The process of investing will depend on the individual circumstances of the investment.  For example, if an individual is investing in a friend or family’s business, then the process will usually be much simpler than the process a venture capitalist of angel investor would want to follow.  In addition, if an investor comes through a funding platform, then the process is likely to be different again.

As a general rule of thumb, the higher the investment amount and the more experienced the investor, the more paperwork and protections they are likely to seek.  An individual investing a small sum of money in a friend or family’s business is often less concerned with shareholder protections.

However, at its core, an investment would usually follow the same journey:

What restrictions might there be on new investments?

Restrictions on (or conditions to) the issue of new shares in a company may be set down in:

  • The Companies Act 2006
  • The company’s articles of association
  • A shareholder agreement

These should all be checked carefully by the company before beginning the investment process.

Typical restrictions and conditions to look out for include:

  • Requirement for shareholder approval
  • Pre-emption rights, giving existing shareholders the right of first refusal over the issue of new shares (at the same subscription price)
  • “Anti-dilution” clauses, which protect some shareholders from having their shareholding in the company from being diluted (i.e. reduced) as a result of the new allotment of shares.
  • Requirement to sign up to any shareholder agreement already in place (usually by signing what is called a “deed of adherence”)

Is stamp duty payable?

No, stamp duty is not payable on an investment in a company.

If you need any advice on investing in a company, please contact a member of our corporate and commercial law team in confidence here or on 02920 829 100 for a free initial call to see how they can help.

To speak to one of our experts today, please contact us on 02920 829 100 or by using our Contact Us form for a free initial chat to see how we can help.

Contact Our Team
Emily Shingler
View Profile
Heledd Ainsworth
Trainee Solicitor
View Profile
Rhodri Evans
Senior Associate
View Profile
Rhodri Morgan
View Profile
Rich Craven
View Profile
Siobhan Williams
Senior Associate
View Profile
Stephen Thompson
View Profile

I have worked with Darwin Gray for a number of years and the level of service, professionalism and timely response is second to none. I would highly recommend Darwin Gray to any business.”

Becs Beslee
Dice FM Ltd

Darwin Gray have provided us with a first-class service for many years now. They really take the time to understand our business and develop relationships which results in advice and support that is contextualised and effective.”

Rebecca Cooper
ACT Training

We have worked with Darwin Gray for several years and have always found their services and advice to be first class.”

Karen Gale
Stepping Stones Group

An extremely professional and sincere company who make time for your queries and understand the need to break down certain facts and information to ensure everything is understood perfectly. I would highly recommend the company to anyone looking for any type of legal advice”

Gwawr Booth
Portal Training Ltd

PSS has worked with Darwin Gray for many years. We have always received an excellent service. Prompt and professional advice and support.”

Ledia Shabani
Property Support Services UK Ltd

We have used several departments within DG recently and we have been very pleased with an effective, efficient and down to earth service. Very happy thus far and I expect that we will continue to use DG.”

Guto Bebb
Farmers’ Union of Wales

Darwin Gray offer us truly superb services. Very professional, quick and services available bilingually which is very important to us, highly recommend.”

Iwan Hywel
Mentrau Iaith Cymru

My “go to” in urgent and time sensitive cases for direction, support and advice. The team are quick to respond to calls or emails for advice and support on all matters. Always explain complex matters in a way a lay person can easily understand.”

Margot Adams
Guarding UK Ltd

Darwin Gray have acted for myself and my company over a number of years and at all times we have been treated with a professional manner yet maintain a common-sense approach at all levels. We couldn’t recommend them more highly.”

Simon Baston
Loft Co

We have been clients of Darwin Gray for many years; they’ve always dealt with all of our legal matters with such professionalism. They work around us, even during awkward hours, and we feel confident we can always rely on them.”

Louise Williams
ACT Training

Darwin Gray has been acting for Siltbuster for more than ten years. We would have no hesitation in recommending Darwin Gray to other organisations small or large.”

Richard D Coulton
Siltbuster Ltd

From the very first conversation, I had no doubt that Darwin Gray should be the firm to receive our instructions on this matter. I would have no hesitation in recommending Darwin Gray.”

Sandra Warr
Tomos TV

We regularly instruct Darwin Gray. Their service in dealing with our transactional matters and disputes is always professional, prompt and efficient.”

John Poppleton
Absolute Property Management Solutions Ltd

Darwin Gray guided me through a long and extended process that would have been much more difficult had it not been for their patience and constant support.”

Ifan Lewis

Excellent and efficient service. Great result achieved, highly professional and transparent on pricing. Would recommend.”

David Stevens

Superb legal service provided. Exceeded expectations. They went above and beyond in order to provide the best service possible.”

Huw Pickrell

Very professional and understanding. They were a calming influence in a very troubling situation and they brought it to a very successful conclusion”

Rachel Jones

We have used Darwin Gray and have been seriously impressed. The personal approach is what Darwin Gray are excelling on and is the reason why we will continue to work with them in the future.”

Cadwyn Housing Association