All companies on the Vestd Platform have the option to adopt the standard Vestd Articles of Association for free. These are based on the British Venture Capital Association’s template articles of association, which are adopted by many early stage companies.
Our legal partners, CMS, have carefully configured these Articles to ensure that they future proof the company (to the extent possible) to how it might develop, be invested in, and eventually make a sale.
In terms of investment:
- The Articles have been drafted to ensure that existing or future SEIS & EIS shareholders will not be impacted, with respect to meeting HMRC qualifying criteria (n.b. you must not be an existing shareholder for EIS/SEIS to be applicable).
- The Articles are compatible with and should not preclude any future crowdfunding.
In terms of exits:
- The Articles include “drag along and tag along” clauses in case of an exit. This ensures that any minority shareholders will have the right to be bought out in the case of the company changing hands, and the company can ensure that they are bought out, if they so want.
- The Articles are drafted to limit any issues in the event of a non-cash acquisition of the company, such that the purchase to go ahead without problem (Article 20).
In terms of buy backs or transfers:
- The directors have the right to refuse a transfer to anyone of whom they do not approve.
- If it is approved, then all existing shareholders (excluding 'growth share' shareholders) have pre-emption rights up to the whole transfer, unless oversubscribed, in which case they access it pro-rata with their shareholding.
- Price will be as agreed between seller and board or based on a fair market value determined by independent valuer.
In terms of enabling growth shares, the specific elements are:
If you wish to issue growth shares on the platform, you will need to adopt the Vestd Articles.
- Allowing the growth shares to be either nonvoting (Vn) or voting (Vv) shares.
- Ensuring that, in the event of a reward requirements not being met, the growth shares in question can be partially or fully converted by the Directors into worthless “deferred shares” (Article 8).
- Allowing V shares to be issued even after there is tangible value in the business without causing an income tax exposure to the recipient. This is commonly known as “growth shares” and they share only in the value growth of the business from the point of issue, so the recipient is not exposed to income tax on award, only capital gains tax on sale of the shares.
- Ensuring that the value of the business will be shared correctly amongst the various shareholders on a liquidation event, depending upon the value of the business at the point at which the shareholder had originally received the shares (Article 5).
- We can hold the V shares on behalf of their owners, so the share capital table is not fragmented with multiple legal owners (a fragmented “cap” table can put off VCs).
Our team, content and app can help you make informed decisions. However, any guidance and support should not be considered as 'legal or financial advice'.