Halvorsen & Reith

Investment round governance readiness for cross-border groups

Investment round governance readiness is the set of checks a board and its counsel complete before a funding round closes, so that constitutional documents, share registers and board resolutions can withstand the diligence an investor's counsel will run. A group that starts this work only after a term sheet is signed usually finds gaps that cannot be closed before completion without delaying the round. The exercise does not create new corporate powers; it confirms the ones the company already holds, and repairs the ones it does not.

A holding company preparing a Series B round finds, during the investor's diligence, that a subsidiary's constitutional documents were never updated after an earlier share transfer and that two resolutions authorising prior allotments were never signed. The round is priced and the investor is waiting. Closing the gap now costs time the parties do not have. Leaving it open lets the round itself fix the defect permanently on the record, in a form no later resolution can quietly correct.

What follows sets out when this work has to start, what it produces, and what falls outside it.

The situation investment round governance readiness addresses

The trigger is rarely the round itself. It is the moment a group realises that its constitutional documents, its register of resolutions and its record of who is actually authorised to sign no longer match what the company has done in practice. A subsidiary added mid-cycle, a director replaced without a formal ratification, a class of shares created for one investor and never reflected in the constitution: each is manageable on its own. Together, inside a live round, they become the items an investor's counsel lists in a disclosure schedule and asks the company to explain.

The same gaps surface in adjacent work. A group running a related sale process alongside the round faces the same questions from a different direction, which is why governance due diligence for M&A and round readiness draw on the same underlying record rather than two separate ones.

The structures most exposed are the ones assembled quickly, across more than one jurisdiction, by founders solving a commercial problem rather than building a governance file. A cross-border structure with entities added at different points, under different local rules, is the population this work serves most often, and it is rarely the population that thinks it needs the work until an investor's counsel says otherwise. The population most exposed includes single-deal special purpose vehicles, holding companies that have accumulated subsidiaries opportunistically, and joint ventures where board composition was negotiated once and never revisited as ownership changed.

A group with one entity in a financial free zone faces a version of the same question with its own local answers. The position in one such centre is set out separately, at governance readiness in the Abu Dhabi Global Market, and the pattern repeats across most active jurisdictions: the question is the same, the answer is local.

A syndicated round compounds this further. Each participating investor's counsel runs its own version of the same check, on its own timetable, and inconsistencies that one set of counsel treats as immaterial become the item another set of counsel escalates. The company ends up answering the same underlying question more than once, in slightly different form, unless the governance record was put in order before the first request arrived.

What triggers the work, and why timing matters

Three events reliably start this work, and each has a different amount of runway attached. A term sheet being signed gives weeks. A data room opening for confirmatory diligence gives days. A closing date already fixed in the term sheet gives none: by that point, the record either supports the round or the round proceeds with a documented gap that someone will have to warrant around.

Once a data room opens, every gap in the constitutional record becomes visible to counterparties who have no reason to give the company the benefit of the doubt, and a defect that was invisible while the company kept its own timetable turns into a negotiating point the moment someone outside the company can see it.

Timing matters because remediation options narrow as the round proceeds. A missing board resolution can be ratified before signing with comparatively little friction. The same gap discovered after signing usually has to be disclosed, warranted against, or priced into the round, and none of those routes restores the position the company would have been in if the resolution had existed on time. Where a statutory filing was due at the time of the earlier change and was never made, the gap does not sit only in the company's own records; it sits on a public register that the investor's own counsel will check independently of anything the company discloses.

Founders frequently assume that because a decision was made and everyone agreed to it, the decision is authorised. Agreement inside a room is not the same as a resolution on the record, and the gap between the two is exactly what this work is designed to close before anyone outside the company is in a position to ask about it.

Investors' counsel find these gaps because finding them is the job; a confirmatory diligence exercise is built around exactly the documents this work puts in order. Discovering the gap through that process rather than in advance costs the company negotiating leverage it did not need to give up. Groups that have raised more than one round without a readiness review in between often carry gaps that accumulated silently across rounds, each one added by a different set of transaction counsel working under time pressure, none of whom had a mandate to look backwards at what the previous round had left unresolved.

A group with a signing date already fixed does not have time to discover a gap after the data room opens. The question is not whether the record is perfect; it is whether the specific gaps in your structure are known and priced before the investor's counsel finds them for you.

Check what your jurisdiction requires. Write to info@hreithlaw.com with the jurisdiction and the structure.

What the work produces, in sequence

The work proceeds in a fixed sequence, because each step depends on the one before it producing an accurate answer, not an assumed one. The five items below are what a group receives, in the order they are produced.

Skipping a step in this sequence does not save time; it simply moves the discovery of a problem later in the process, at a point where remediation options are narrower and the cost of narrowing them falls on the round's own timetable rather than on the review.

The resolution matrix is usually the most contested document in the file, because it is where a founder's assumption about what was authorised meets what the record actually supports. A separate note sets out which board resolutions a round of this kind typically requires and in what order they need to be passed.

Each artefact is built to be used, not filed away. The gap memorandum tells the board what to decide. The resolution matrix tells the company secretary or the coordinating director what to sign and in what order. The marked-up constitutional documents go straight to whichever local counsel is instructed to file the amendment. Nothing in the sequence sits unused waiting for a later stage.

Where this differs by jurisdiction

No two jurisdictions test a board resolution the same way, and a cross-border structure has to confirm the local answer for each entity rather than assume the answer from the entity where the group is headquartered. What counts as a validly constituted board meeting, what has to be filed rather than merely held, and what becomes public once it is filed are all set locally, and a governance file that is correct for one entity in the group can still be wrong for another.

In several jurisdictions a change made at board level becomes visible on the register only once the relevant filing is lodged, which means a gap that the company has already fixed internally can still appear open to anyone checking the public record until that filing catches up. The regulatory exposure is highest not at the moment the change is made internally, but at the moment it is filed, or should have been.

Some registers require the underlying resolution to be filed alongside the change it authorises; others require only the change itself, leaving the resolution as an internal record the company keeps but never submits. A governance file built to one standard does not automatically satisfy the other, which is why a cross-border structure has to be checked entity by entity rather than assumed correct once one jurisdiction has been confirmed.

A number of jurisdictions also maintain a separate register of beneficial ownership, distinct from the register of officers, and a change made for the round can trigger an update obligation on one register without automatically triggering it on the other. Confirming which register moves, and when, is part of the same jurisdictional check rather than a separate exercise.

Constitutional documents can also carry local restrictions that have nothing to do with the round itself and everything to do with how shares move once it closes; how a company's articles can restrict share transfers is one example of a provision that a readiness review has to check regardless of where the round is happening.

Where the group's structure itself is under review rather than just its paperwork, the choice of vehicle and domicile becomes part of the same conversation; how redomiciliation and continuation routes compare across the jurisdictions a group is considering is the reference point for that separate question.

None of this replaces local counsel in each jurisdiction concerned; it is the layer that tells local counsel exactly what to confirm, in what order, so that the group is not paying for a full review of every entity when only a subset of the group actually carries exposure this round. The practical consequence for a group with entities in more than one jurisdiction is that readiness work does not scale linearly: confirming the position in a second jurisdiction is not a smaller version of the first, it is a fresh check against a different set of local rules, run against the same round timetable.

What this service does not include

This engagement does not include acting as a director, secretary, nominee shareholder or trustee for the company, and it does not include supplying, sourcing or arranging for any other person to fill those roles. It also does not include any activity for which a trust or corporate service provider licence is required in the jurisdiction concerned.

The boundary is a licensing one, not a matter of preference. Advising on what a board resolution must say is legal advice; standing in as the person who signs it, or finding someone else to, is a regulated activity in a majority of the jurisdictions this practice covers, and the firm holds no licence for it.

The scope is deliberately narrow. It covers the governance mechanics: authority, resolutions, constitutional documents, filings. It does not cover tax structuring, valuation, or the commercial terms of the round itself, each of which sits with a different adviser working from a different brief.

What the engagement does produce is the material a board or its own appointed officers need to act correctly and on time. The list below is deliberately short: each item is something the board itself, or its own officer, has to receive and act on directly.

A board that understands exactly where its authority comes from, and exactly what is missing, is in a materially stronger position in front of an investor's counsel than a board that simply asserts that everything is in order.

The gaps this work finds are cheapest to fix before signing and hardest to fix after the register has already recorded the round. Confirming the position now is materially different from confirming it once the investor's counsel has already asked the question.

Check what your jurisdiction requires. Write to info@hreithlaw.com with the jurisdiction and the structure.

Frequently asked questions

What does investment round governance readiness actually require in practice?
It requires confirming that the company's constitutional documents, its register of resolutions and its filed record match what the company has actually done, not what the founders believe was done. A common assumption is that this is a paperwork exercise finished once documents are signed. In practice the harder part is confirming what actually happened operationally against what the records show, and closing the gaps that surface.
Who inside the company is responsible for investment round governance readiness?
The board carries the duty, not a single officer, though in practice one director or the company secretary usually coordinates the check. Responsibility does not shift to outside counsel simply because counsel is running the review; the board still has to approve what the review produces and act on it.
What evidence should the board keep on file?
The resolution matrix, the marked-up constitutional documents, and the closing checklist are the minimum record. Keeping the memorandum that identified the gaps is also worth doing, because it shows the board acted on a known position rather than discovering it during diligence, which matters if a warranty is ever tested later.
What happens if the gap is not addressed before the round closes?
The gap does not disappear; it becomes a disclosure item, a warranty, or a price adjustment, and in some jurisdictions it also becomes a matter of public record once the round's own filings are made. None of those outcomes restores the position the company would have had if the gap had been closed beforehand.
How often should this be reviewed, and does it run to a fixed schedule?
There is no fixed interval; the trigger is an event, a term sheet, a new class of shares, a director change, not a calendar date. A group running frequent rounds usually finds it more efficient to keep the resolution matrix current continuously rather than rebuilding it from scratch before each round.
By Lukas Fenn