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Businessman Pays Price for Investing £50,000 without Legal Advice

A businessman who invested £50,000 in a hi-tech company without any kind of formal contractual protection has failed to convince the High Court that he was entitled to a stake in the company.

He argued that he was to receive a ‘reasonable shareholding’ in the company in return for his money – which he put at between 6 per cent and 13 per cent of the equity. He asked the High Court to ‘fill the gaps’ in the sparse agreement and sought damages for alleged breach of contract.

However, the company insisted that he had agreed, but failed, to invest £250,000 in its shares; that important terms of the deal were never finalised and that the whole arrangement was subject to contract.

The Court found that the man had advanced £50,000 in anticipation of an agreement to invest in return for shares, but that no such agreement had been concluded. He was, however, entitled to the return of his money together with interest calculated on the basis that it had been a loan to the company.