Seed Round Checklist For Australian Startups

Maya runs a SaaS startup in Melbourne. After months of pitching, an angel investor says they're ready to put in $500,000 - but they want to see the company documents, founder agreements and investment paperwork before signing.

That moment is exciting, but it can also feel like the admin suddenly got very real. A seed round isn't just about agreeing on a valuation and receiving money in your bank account.

You're issuing shares, changing your cap table, making promises to investors and recording corporate approvals under Australian company law. The good news is that this doesn't have to be messy if you get the right documents in place early.

What Is A Seed Round For A Startup?

A seed round is usually an early external investment round where you raise capital to build, launch or grow your business in exchange for equity or another investment right.

In Australia, many seed rounds happen after you have built an MVP, signed early customers, or shown enough traction to convince investors that the business has real growth potential. The money might be used for product development, hiring, marketing, regulatory work or expanding into a new market.

A seed round can be structured in different ways, including:

• Ordinary shares, where investors receive shares in your company straight away.
• Preference shares, where investors receive shares with extra rights, such as a liquidation preference or special voting rights.
• Convertible notes, where the investment starts as debt and can convert into shares later.
• SAFE-style documents, where the investor receives a right to future equity, usually on a later priced round.

The right structure depends on your stage, valuation, investor expectations and company setup. For a straightforward Australian seed round, a priced equity round using a share subscription agreement and updated shareholders agreement is common.

The legal work matters because you aren't just taking cash. You're changing who owns the company and who has a say in future decisions.

What Legal Documents Do You Need For A Seed Round?

You usually need a term sheet, share subscription agreement, shareholders agreement, corporate approvals and ASIC filings for a seed round.

The exact document set depends on the structure of your raise, but most Australian startups should prepare the following before money changes hands:

• Term sheet setting out the key commercial deal points, such as valuation, investment amount, share type, investor rights and completion conditions.
• Share subscription agreement covering the issue of new shares to investors and the promises each side makes.
• Shareholders agreement setting out how founders, investors and other shareholders will make decisions and deal with shares later.
• Company constitution that works with your shareholders agreement and supports the class of shares you're issuing.
• Board and shareholder approvals recording that the company has properly approved the share issue.
• Cap table showing who owns what before and after the round.
• Disclosure exemption records showing why you can make the offer without a regulated disclosure document, if you're relying on an exemption.
• ASIC Form 484 to update the company's share structure and members after the issue.

Templates can be useful for spotting the main topics, but seed round documents work best when tailored to your business, your cap table and your investors. A small drafting gap can create a big problem later, especially when you raise a Series A or sell the business.

What Should A Share Subscription Agreement For A Seed Round Include?

A share subscription agreement should clearly state who is investing, how much they're paying, what shares they're receiving and what needs to happen before completion.

This is the document that turns the investment deal into a binding legal arrangement. It should be practical and specific, not just a few lines saying someone is buying shares.

Share Subscription Agreement Outline

Here is a useful outline of the sections you would normally expect to see. This isn't a finished legal document, and a lawyer should tailor it before you use it.

1. Parties - write the full legal name, ACN or ABN where relevant, and contact details for the company and each investor.
2. Investment Amount - state how much each investor is paying and the total amount being raised.
3. Shares Being Issued - describe the number, class and issue price of the shares.
4. Completion Conditions - list what must happen before completion, such as board approval, shareholder approval or signing the shareholders agreement.
5. Completion Process - explain when funds are paid, when shares are issued and when the share register is updated.
6. Company Warranties - set out statements the company makes about its records, ownership, IP, debts, contracts and compliance.
7. Investor Warranties - include statements that the investor can legally invest and is relying on the agreed documents.
8. Use Of Funds - describe how the company expects to use the investment, such as product development or hiring.
9. Confidentiality - protect sensitive business and investor information.
10. Termination - explain when a party can walk away before completion.
11. Governing Law - state the Australian state or territory law that applies.

If you're issuing preference shares, the agreement should also match the rights in your constitution and shareholders agreement. If the documents say different things, you may end up with arguments about which rights actually apply.

What Corporate Approvals Do You Need Before Taking Seed Investment?

You usually need board approval, and you may also need shareholder approval depending on your constitution, shareholders agreement and the type of shares being issued.

Under the Corporations Act 2001, issuing shares is a company action that needs to be properly authorised. For a small proprietary company, your starting point is the company constitution, any shareholders agreement and the replaceable rules if they apply.

Your approval checklist should usually include:

• Board minutes or circulating resolutions approving the offer, the issue price, the investor documents and the share issue.
• Shareholder resolutions if existing shareholder consent is required under your constitution or shareholders agreement.
• Waivers of pre-emptive rights if existing shareholders have first rights to subscribe for new shares.
• Consent to become a shareholder from each investor, where required.
• Updated share register showing the new shareholders and shares issued.
• Share certificates if your company issues them or your documents require them.
• ASIC Form 484 lodged within 28 days of the share issue to update company details.

You should also check the 50 non-employee shareholder limit for proprietary companies. If your raise pushes you towards that cap, you may need advice on your structure before accepting more investors.

One practical tip: keep signed resolutions, final documents, payment records and the updated cap table in one folder. Investors in your next round will usually ask for these during due diligence.

Do You Need To Worry About Fundraising Laws In Australia?

Yes, you do need to check fundraising laws because offers of shares are regulated in Australia, and not every startup can freely offer shares to anyone.

Chapter 6D of the Corporations Act 2001 sets out rules for offering securities. In many cases, offering shares requires a disclosure document unless an exemption applies.

Common exemptions used in startup seed rounds include:

• Small scale personal offers where you make personal offers that result in no more than 20 investors and no more than $2 million raised in any 12-month period.
• Sophisticated investor offers where the investor has a qualified accountant's certificate showing at least $2.5 million in net assets or gross income of at least $250,000 for each of the last two financial years. The certificate for this exemption generally needs to be no more than 6 months old when the offer is made.
• Professional investor offers for certain investors who meet the professional investor criteria.

These exemptions have details that matter. For example, the 20 investor and $2 million limits apply over a rolling 12-month period, so you need to count earlier offers that fall inside that period.

You also need to be careful with public posts, pitch decks and investor updates. If your raise is only meant to go to a small group of exempt investors, broad public promotion can create issues.

If you're considering crowdfunding, a public raise, or investors outside Australia, get advice early. Those paths can trigger extra rules, platform requirements or overseas law issues.

How Should You Prepare Your Cap Table And Valuation?

You should prepare a clean cap table before you sign investment documents, because your valuation and share numbers flow through the whole seed round.

Your cap table should show your current shareholders, option holders, promised equity, share classes and what ownership will look like after completion. If you have made informal promises to advisors, contractors or early employees, deal with those before investors find them.

Let's go back to Maya's SaaS startup. Her company has 9,000,000 ordinary shares on issue, all held by the founders. The investor agrees to invest $500,000 at a $4,500,000 pre-money valuation.

If the round is priced on the current shares, the issue price is $0.50 per share. That means the investor receives 1,000,000 new shares for $500,000.

• Pre-money valuation - $4,500,000.
• Investment amount - $500,000.
• Post-money valuation - $5,000,000.
• Investor ownership after completion - 1,000,000 out of 10,000,000 shares, which is 10%.
• Founder ownership after completion - 9,000,000 out of 10,000,000 shares, which is 90%.

That simple example can change if there's an employee option pool, convertible note, SAFE, preference share class, advisor equity or a second investor. A 10% option pool created before the raise can dilute the founders differently to a pool created after the raise.

Make sure your investment documents match the cap table exactly. If the numbers don't line up, completion can be delayed and investor trust can take a hit.

What Should You Check Before Signing Seed Round Documents?

You should check the commercial terms, investor rights, founder obligations, IP ownership and compliance records before signing.

A seed round can feel urgent, especially if payroll, product development or runway is tight. Still, it's worth pausing before signature to make sure the deal you're signing is the deal you think you agreed.

Founder Checklist Before Completion

• Confirm the investment structure - ordinary shares, preference shares, convertible note or SAFE-style instrument.
• Check the valuation mechanics - pre-money, post-money, fully diluted basis and option pool treatment.
• Review investor rights - board seat, observer rights, veto rights, information rights and consent matters.
• Check founder vesting - if founders are being asked to vest shares, understand what happens if someone leaves.
• Lock down IP ownership - make sure founders, contractors and developers have assigned relevant intellectual property to the company.
• Review employment and contractor documents - investors often check that key workers have confidentiality and IP clauses.
• Check privacy and data compliance - if you handle customer data, your Privacy Act 1988 position and privacy policy may be reviewed.
• Confirm approvals - board resolutions, shareholder resolutions and pre-emptive rights waivers should be signed before completion.
• Plan post-completion filings - update the share register immediately and lodge ASIC Form 484 within 28 days.

Pay close attention to investor veto rights. Some rights are normal, such as investor consent for issuing a new class of shares or selling the business. Others can make everyday decisions harder, such as needing investor approval for ordinary hires or routine customer contracts.

You should also check whether your shareholders agreement restricts founder share transfers, side projects and competing activities. Those clauses can be reasonable, but they need to fit how you actually work.

Common Seed Round Mistakes To Avoid

The most common mistake is treating the seed round as a handshake deal first and a paperwork exercise later.

That approach can work while everyone is excited, but it becomes risky when expectations differ. Clear documents help you keep momentum and avoid awkward disputes when the business starts growing.

Watch out for these issues:

• Issuing shares before approvals are signed - this can create questions about whether the issue was validly authorised.
• Forgetting ASIC updates - Form 484 should be lodged within 28 days after the share issue.
• Relying on the wrong fundraising exemption - this can create regulatory problems and investor concerns.
• Not updating the shareholders agreement - investors may need to become parties, and new rights should be properly recorded.
• Leaving IP with founders or contractors - investors want the company to own the product it's raising money to build.
• Ignoring old promises of equity - informal advisor or employee equity promises can disrupt your cap table.
• Using inconsistent documents - your term sheet, subscription agreement, constitution and shareholders agreement should all tell the same story.

If something has already gone wrong, start by gathering the signed documents, emails, payment records, board minutes, shareholder resolutions and ASIC records. Then work out what was agreed, what was actually done and what needs to be corrected.

Some issues can be fixed with fresh approvals, confirmatory documents or updated filings. Others need careful handling, especially if investors have relied on statements in your documents.

Key Takeaways

• A seed round isn't just a funding milestone - it's a legal share issue that changes ownership and control of your company.
• Your main seed round documents will usually include a term sheet, share subscription agreement, shareholders agreement, approvals, cap table and ASIC filings.
• Australian fundraising rules matter, especially if you're relying on small scale, sophisticated investor or professional investor exemptions.
• Your cap table, valuation and share numbers should line up across every document before completion.
• After issuing shares, update your share register and lodge ASIC Form 484 within 28 days.
• Get founder, IP and contractor documents cleaned up before investor due diligence, not after.

If you'd like help with your seed round documents, company approvals, shareholder arrangements or ASIC share issue steps, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.