This page provides summary information on what Imperial expects when it becomes a shareholder in spinout companies. It also includes a summary of what Imperial considers to be key shareholder rights and a description of each of these.

The template agreements referred to on this page can be found on the Founders Choice information page.

Summary of Imperial's basic expectations:

  • Under Imperial's Founder's Choice programme, Imperial's template Shareholders' Agreement (SHA) and Articles of Association (AoA) must be used in order for Imperial to join as a shareholder at spinout. To streamline the spinout process, it is essential that the template language is not modified except on matters that only concern the Founders. Such matters would include, for example, good and bad leaver provisions and vesting provisions, and to incorporate the terms of the Memorandum of Understanding (MoU) agreed with the spinout Founders during the spinout process.
  • If investment is received at spinout, it is Imperial’s strong preference that its Shareholders’ Agreement and Articles of Association templates are used as the starting point incorporating the terms of the MoU, as this is still an Imperial (university) spinout.  The MoU outlines the intent for the company and investors will typically agree a non-legally binding term sheet with the spinout company. Both of these ‘term sheets’ are typically incorporated into Imperial’s templates by the spinout company law firm. This greatly speeds-up the process.
  • Imperial's SHA and AoA are based on the British Private Equity and Venture Capital Association (BVCA) model documents, but are modified to include key things important to Imperial (and most other universities and academic founders). These modifications include tax indemnities from Founders provided to Imperial, Imperial’s right to gift-back shares to the company, warranties provided from the Founders to Imperial, the Founders’ right to maintain academic freedom and more.
  • For transparency and to better facilitate the negotiation of key investor terms with the Founders/spinout company, the list below summarises the key principles to be included at spinout. Imperial typically expects these to remain in place. It is noted that reserved matters or matters requiring shareholder or board consent will evolve over time as appropriate as new investors join. Imperial will typically be holding a minority shareholding at spinout so will never expect to have veto rights.
  • It is noted that should Imperial hold equity shares in non-spinout companies, many of these basic expectations still apply.

Key rights for Imperial (Imperial College Innovations Limited)

Information rights

Typically, financials including sight of accounts along with the right to request reasonable information. This is essential for fulfilling Imperial’s reporting obligations and facilitating monitoring of spinouts.

Observer rights

For as long as Imperial holds shares it should (i) have the right to appoint an observer to board meetings (ii) be sent copies of all materials provided to the board irrespective of an observer being appointed. Essential for fulfilling reporting obligations and facilitating monitoring of spinouts.

Gift back shares to New Co

Essentially a ‘get out’ mechanism, to separate association with the spinout company in the case of reputational harm to Imperial.


Low cap. (£10k per founder) vs ‘market’ (e.g. 1x salary). Deterrent against not providing the truth on matters pertaining to the IP and the intention of the business itself. Company limit of liability is £50k. Non-Founding Inventors and Non-Inventive Founders as carved out as appropriate.

Restrictive covenants

In the interest of the company there are certain restrictions on what founders can do whilst participating in the company and for a period of 12 months after leaving (non-compete). There is a carve out ensuring academic freedom is not restricted.


30% of profits distributed to shareholders on a pro rata basis when profitable (the board can decide to invest in developing the company).

Option pool

Spinouts are encouraged to provide pre-authority to allot shares pursuant to issue of options subject to board approval (10%-20% typical).

Tax indemnity

Founders acquiring shares agree to indemnify Imperial against any potential tax charges and confirm entering s431 elections. If shares are acquired at an undervalue the company must obtain an independent share valuation.

Appropriate class of shares

If founders choose non-dilutable equity, ICIL (Imperial College Innovations Limited) should hold ‘T Ordinary’ shares with non-dilution provisions defining the ‘Non-Dilution Percentage’ and ‘Non-Dilution Threshold’. Once the Non-Dilution Threshold is exceeded, the share class will be redesignated to Ordinary shares. If dilutable equity is chosen by founders, Imperial holds Ordinary shares at spinout.

Shareholder and board consent matters

Shareholder consent matters require 75% to pass. Board consent matters require more than 50% of board to pass.  Both are based on best-practice corporate governance at spinout prior to investment.

Co-sale rights

Requires the shareholders (especially founders) before selling shares to a 3rd party to allow other shareholders to participate in the sale in proportion to their shareholding. Imperial expects the opportunity to be part of a deal the founders make.

Pre-emption rights

All new shares issued in the company should be offered to existing shareholders first (pro rata to shareholding). This can normally be waived via (special) resolution. This is important in the event that Imperial does want to invest in the future.


If holders of at least 75% of all shares in issue agree to sell their shares, all remaining shareholders and option holders will be required to sell on the same terms. Dragged shareholders will not be required to provide to the purchaser any representations or warranties (except as to title).

Transfer of shares

Founders are not permitted to transfer or dispose of shares within 2 years except on an exit event or with shareholder consent. This is important to demonstrate a commitment to the company.


Imperial College Innovations Limited (ICIL) is the contracting party holding equity shares and is a wholly owned subsidiary of Imperial. ICIL should be able to share confidential information with the Imperial Group as defined in the SHA, which includes Imperial.

Termination and variation (of SHA)

90% default Shareholder consent is required to ensure most founders are aligned when such major decisions are to be made, irrespective of whether they are on the board. 

Permitted transferees

ICIL must be able to transfer shares to any member of the Imperial College Group, as defined in the Articles of Association.

Content status

The information on this page was most recently updated on 31 May 2024.