The company, which designs and manufactures ‘environmentally responsible’ packaging, will use the funding to refinance existing debt and expand its business overseas.

Ludgate Environmental will invest £1.5 million in ordinary shares and £2.5 million in convertible unsecured loan stock (CULS). Its investment is part of a wider placing comprising £2 million of shares and £4.1 million of CULS.

As part of the deal, Nick Pople, a director of Ludgate Environmental’s parent company, will join Rapid Action’s board.

Pople says: ‘Driven by consumer demand, corporate responsibility considerations, current media attention and legislative changes, the food packaging market is now experiencing a significant shift in demand away from plastic to more environmentally responsible materials.’

Established in 1997, Rapid Action Packaging is headquartered in Ireland. Its products are fully compostable and biodegradable and its customers include most of the larger supermarket chains in the UK, according to the company.

Its turnover grew by some 40 per cent to £11 million last year.