Why is it important?
When a new company is started, the owners often use basic paperwork provided by a third party establishing the company for them – Articles, shareholder agreement, basic appointment of directors and so on – and this is fine. But then these are equally often put in a drawer and forgotten. It’s all too easy for corporate events to happen without being done properly, and this will have to be unravelled and sorted before a sale or getting investors. It’s all straightforward and obvious… but too often gets forgotten as not immediately important for the business.
Do make sure every shareholder is signed up to the shareholder agreement
If anyone has shares issued to them without being signed up to the shareholder agreement, then they’re not bound by it – a loose cannon. Nor do they have to sign up if they don’t want to. This may sound like common sense, but it does happen.
Keep the shareholder agreement out and read it
Before deciding to anything major in the business, re-read the SHA. Quite often there will be agreements that must be reached or other hoops to jump though
Are electronic communications with shareholders allowed?
Electronic communications from the company to shareholders are not permitted unless the shareholders have generally or specifically consented to them. Getting such consent at an early stage make later communications much easier.
Record the decisions leading to corporate events carefully
When taking decisions, do record them in board minutes, in particular noting which formal actions have to be taken and that they have been taken properly (and how)
Keep the records where you can readily lay your hands on them
Keep a formal file for the board minutes, shareholder agreement, formal communications and so on. It will save a lot of time if they don’t have to be hunted down in future for (for example) a due diligence exercise
Keep the statutory filings up to date
Easy to forget, and there are penalties. Diarise them.
Who’s in charge?
Is it clear who is responsible for all this?. If there’s a Company Secretary, it should be for them… if not, then make sure it’s clear who is. And in either case make sure that they’re on top of it!
Written by James McLeod
Principal at My Inhouse Lawyer
One of our values (Growth) is, in many ways, all about cultivating a growth mindset. We are passionate about learning, improving and evolving. We learn from each other, use the best know-how tools in the market and constantly look for ways to simplify. Lawskool is our way of sharing with you. It isn’t intended to be legal advice, rather to enlighten you to make smart business decisions day to day with the benefit of some of our insight. We hope you enjoy the experience. There are some really good ideas and tips coming from some of the best inhouse lawyers. Easy to read and practical. If there’s something you’d like us to write about or some feedback you wish to share, feel free to drop us a note. Equally, if it’s legal advice you’re after, then just give us a call on 0207 939 3959.
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