By Helen Dale
So you’ve got a new startup; you’ve sorted (with us, of course) all the relevant ‘legals’; you’ve even got 20 or 30 tech-savvy investors. And, after trading for a year, you discover that the only way to provide your shareholders with a copy of the annual report is on paper, via snail mail. It weighs a tonne, costs a fortune in postage, kills a heap of trees, and has the effect of making your young private company look distinctly old (and old-world) in the process.
It doesn’t have to be this way.
Large, listed companies have been quick to take advantage of the regime for electronic communications now available under the Companies Act 2006. It saves on money, trees, and postage. And it’s time for private companies to get in on the act.
What will you be able to do?
Your company will be able - via email - to send to and receive from shareholders all the documentation that can make running a company an expensive paper chase. Documents include everything from proxy notices to annual reports and accounts to written resolutions.
How do you set this up?
Depending where you are in the incorporation process, it may be necessary to draft your articles of association—in advance—so that you’re able to communicate with shareholders electronically. If you’re already up and running, then you’ll need a resolution to amend the articles to insert the relevant provisions permitting electronic communications. Alternatively, it’s possible—if you’re ever considering holding an AGM—to propose the passing of a shareholders’ resolution to approve communication in electronic form. The more common practice thus far has been for companies to amend their existing articles.
If you want to make it possible for members to communicate with your company electronically, then you need to provide an electronic address for the company and consider how you’re going to authenticate a given shareholder’s identity.
Depending on your company’s communication needs, it’s also possible to make the same documentation available for download from a website.
Are there any downsides?
It’s not possible to eliminate paper entirely, and for those members who insist on receiving documents in hard copy form, your company will be obliged to supply them within 21 days. However, the convenience and simplicity of making something like an annual report available electronically should not be underestimated. If properly produced in-house, it will be fully searchable and attractive to look at, while shareholders only have to print out those sections that they need.