The Sunday Roast Clause: A UK Founder's Field Guide to Friends-and-Family Cheques

The first cheque usually lands on a Tuesday morning, mid-way through a supermarket run, with a message that says: "Sent it over. No rush on the paperwork." Lovely. Except there is a rush on the paperwork, and the person who sent it is probably the person whose opinion matters to you more than any investor's ever will.

Friends-and-family money is the most common first funding round in the UK and the least talked about. It doesn't have a podcast. It has a dining table.

So before the transfer clears, here's the homework.

Start with the question nobody asks out loud

Can they afford to lose it?

Not "would they mind." Can they actually absorb the loss. A parent dipping into a pension pot, a sibling using their house deposit, a mate who's just been made redundant — those are not investors, they're hostages to your success.

One founder I spoke to in Leeds took £15,000 from an aunt, spent nine months building a product, then discovered she'd borrowed it against a credit card. The business worked out eventually. The family did not, for about three years.

Ask the blunt version of the question. Then listen to the pause.

Loan or equity — and no, it can't be "both, sort of"

Almost everyone tries to invent a third category in the first conversation. "It's a loan but if it goes well she gets a slice." That's not a category. That's a future argument.

A loan is the cleaner option for most families. They get their money back, plus whatever interest you agree. You keep 100% of the company. The relationship stays as it was.

Equity is the option for people who genuinely want the ride — who understand the money might vanish and who want to be on the cap table when it doesn't. It also means they're now a shareholder, with the rights that implies.

Pick one. If they want the upside, sell them shares. If they want their savings back, write a loan agreement. If they want both, you're describing a convertible loan note, and you should probably have that conversation with an adviser rather than over a cup of tea.

What goes in writing, even when it's Dad

For a loan, four or five paragraphs is genuinely enough — but they need to say:

• The amount and the date it was advanced
• Whether interest is charged, and at what rate (0% is fine; it just has to be stated)
• When repayment starts, and over what period
• What happens if the company can't pay — is it repayable on demand, or on a fixed date?
• Whether there's any security, and whether the loan converts into shares if you raise later

Write it down, both sign it, keep a copy. A short loan agreement drafted by a solicitor costs less than a single hour of a lawyer's time further down the line, when nobody remembers what was agreed.

For equity, the paperwork is heavier and the mistakes are more expensive:

• Share certificates and an updated register of members
• An SH01 filed with Companies House within one month of the allotment
• A shareholders' agreement if you're bringing in anyone who'll expect a say — pre-emption rights, drag-along, what happens if they die or fall out with you
• The cap table updated properly, in one file, dated

If the investment pushes anyone past 25%, the PSC register needs updating too.

And for both routes: agree, in writing, what happens if you fall out. Not because you will. Because the awkward version of the conversation is much easier now than in eighteen months.

The tax questions your accountant will actually ask

You don't need to become a tax expert. You do need to know the shape of these before you promise anything.

Are the investors expecting SEIS or EIS relief? Relatives can sometimes qualify, but the connected-person rules are fiddly and can disqualify people you'd assume were fine. Don't let anyone budget for 50% relief until an adviser has confirmed it — and if you're relying on it to close the round, get advance assurance first.

Is it a gift or an investment? There's no general gift tax in the UK, but a large gift can still be a potentially exempt transfer for inheritance tax purposes if the giver dies within seven years. Worth flagging to anyone older who's being generous.

Is interest being paid? If yes, whoever receives it needs to declare it. If the loan is interest-free, there may still be record-keeping implications on both sides.

Are you taking money from the public? A private ask to people you know is one thing. A LinkedIn post inviting strangers to invest is a financial promotion, and the rules are not casual. Keep the round private.

The Sunday roast clause

Here's the bit no agreement covers: the relationship.

Agree in advance how often you'll update them. Monthly is too much for most families and annually is too little. A short email every quarter, with the numbers, stops the imagination filling the gaps — and imagination is what turns a normal slow quarter into a relative quietly panicking at Christmas.

Agree, too, on what they don't get: a say in hiring, a vote on the logo, or a seat at the table. If they're an investor with rights, put those rights in the shareholders' agreement. If they're a lender, they're a lender.

And agree what happens if it fails. Say the sentence out loud: "If this doesn't work, I'll tell you first and we'll work out the payments together." You'll be amazed how much of the tension evaporates once the worst case has been spoken.

Before the transfer clears

A short list: confirm they can lose it, decide loan or equity, put it in writing, file what Companies House needs, get the tax questions answered before you promise relief, and set the update rhythm.

Then enjoy your Sunday roast. It's much nicer when nobody's thinking about the paperwork.