Beware the Dragons!

It was only later that she fully appreciated that the Dragons’  investment was a loan, not equity, repayable out of cash flow and that the terms included having to pay a monthly fee of £3000 to the one of the Dragons for their support.

In addition, one of them was appointed as chairman with a casting vote on the board, even though they only had 22.5% of the shares.  

If Sharon had bought one of our shareholders agreements before she was presented with the Dragons’ contract, she would have been better prepared and might have been in a position to put forward a counter-proposal. 

As it was, she had a lot of sleepless nights and with the aid of a solicitor, the investment was eventually unwound, but it left her without the Dragons or their money.

Interestingly, one of our customers recently bought a bidding agreement because he was negotiating with another company to tender together with them for a big contract.

He did not entirely trust the motives of his prospective partner and decided that a formal contract would be needed with them.  So he bought a ContractStore template for £32.

When he presented them with our firm but fairly worded agreement, they refused to sign.  And, as he later told one of our team, that meant our contract had served its purpose  – by frightening off a company that would not have been a suitable partner.  And the agreement is still on his file, ready to be used on a future occasion.

The moral of this tale is:

  • always prepare yourself before going to an important contract negotiation
  • always read the contract before you sign
  • if in any doubt, don’t sign on major deals: take legal advice!

The full Dragon’s Den story can be found in the news section of this website HERE