Post investment - what happens next?

An overview of life as a shareholder




2 min read

So, you’ve made your investment in a company, the money has left your account and you’ve become a shareholder. What happens next and what can you expect to happen in the future?

You get shares

Firstly, you should receive proof that you own shares in the company. Typically this will happen after a month or so have elapsed. 

For direct shareholders this will come in the form of a share certificate. The certificate will be in either digital or paper format. Also, your holding will be listed on the company’s share register which is held at Companies House.

Alternatively, if the crowdfunding platform operates a nominee structure, the shares will be held in trust for you by the appointed nominee.

And usually a tax certificate

If you are a UK taxpayer and the company you invested in is EIS or SEIS-eligible you should receive a certificate to allow you to claim back the relevant tax reliefs.

HMRC send these out to the company who should then forward them to investors. Be aware that it can take a considerable length of time for HMRC to send the certificates to companies because their system for issuing these certificates is still paper-based.

You may receive periodic reports

As a shareholder, you will naturally be interested to know how the company is doing. So, you should expect to receive periodic reports on its progress. Typically, these are documents such as trading updates and financial reports. They are usually delivered by email and follow on from board meetings.

You may also be invited to vote if, for example, the company needs to consult its shareholders and obtain their opinion on a particular decision.

If your investment is held under a nominee structure then your nominee should keep you informed by passing on information from the company.

The company may request more funding

In due course, you may be contacted by the company regarding a follow-on round or rounds.

If you are investing via an equity crowdfunding platform such as SyndicateRoom, you will have pre-emption rights. These give you the right of first refusal whenever the company is issuing new shares and are one of the most important rights you can have as an investor in a company. In fact, in early-stage investing, business angels and syndicates of investors consider pre-emption as one of the basic investor protections they will not invest without.

What else can you expect?

The company you invested in may be successful and in due course an exit via, for example, an IPO or acquisition could be on the cards. Depending on the circumstances, you could be obliged or choose to join in the sale of the company on the same terms, valuation and conditions as the majority shareholders. Read more about drag-along and tag-along rights in our glossary.

Of course, there is also the risk that the company could fail in which case you could lose all the money you have invested. One way to address this risk is by creating a diversified portfolio of investments - something all investors should do.

 


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