By Ross McGregor
You’ve thought long and hard about starting up your own business. You've honed the concept, crafted the first draft of the business plan and the newco has been incorporated. Perhaps you’ve even got some investors lined up! It’s an exciting time: people have shown that they believe in you by giving you their money to follow your dream. In return, you’ve promised to give them shares in this new venture - but have you recorded it properly? Not on a spreadsheet on a flashdrive down the back of the sofa, but in the Register of Allotments and Register of Members, preferably stored safely within the company books or a loose leaf register?
You may be interested to know that company books – also known as the statutory registers - are one of the first things that a lawyer will ask for when agreeing to act for a company in any kind of equity investment deal or M & A transaction. Handing them a blank book that was given to you by the formation agent, or giving them a seriously out-of-date version, or worse still, a set that doesn’t reflect the information contained at Companies House, may cost your startup valuable cash to correct and/or bring them up to date. So, even if you incorporate the company yourself, please invest in a good set of company books. These can be easily sourced from many suppliers on the web.
As a starter, log every share transaction in all three main registers (Allotment, Transfer and Members) and cross-reference these where appropriate. Some higher quality books may contain blank share certificates. Complete these and take copies for the books before handing them out to your ‘believers’ with a smile. These simple steps, with little or no cost to the business, could end up saving your startup a lot of hassle and unexpected cost. It also gives potential investors instant clarity on any existing shareholdings within the business - and comfort that you are one of a small band who dot the i’s and cross the t’s!
If you need any help with working out how to record changes in the share capital in your company books, just drop me an email and I’ll be happy to help out.