Congratulations, you have just closed your most recent funding round and received investment into your company! All those months of hard work and being put through the rigorous process that is raising money have finally paid off. But the hard work is only just beginning. While you now have no excuses to deliver on your vision and scale your company to become the next Unicorn, you also have some more immediate responsibilities.
Depending on who is leading the round and what has been agreed prior, there are certain important administrative tasks that need to be carried out almost immediately after the paperwork has been signed and the investment received. All new investors will need their shares. To issue more company shares after receiving investment, this must be approved through a board resolution and all existing shareholders should be notified of their right to pre-emption. On top of this, any other provisions described in the existing company documentation should be complied with.
Once the allotment of the share has taken place, a Return of Allotment of Shares to Companies House must be provided, (Companies House form SH01). All new shareholders must then be issued with signed share certificates as proof of ownership. The statutory register of members should be updated as soon as possible to reflect the share transfer and record details of the new and old shareholders. If necessary, the register of People with Significant Control (PSC register) will also need to be updated. These changes can be reported on the next confirmation statement on Companies House.
It is important to note that this process is separate from issuing SEIS/EIS Compliance Certificates. Again, who should be managing the process on behalf of the company should be agreed prior to investment. Further, a Compliance Statement for HMRC will need to be filed. The Compliance Certificate is the piece of paper that your investors need in order to be able to claim their SEIS/EIS relief. Investors will use the Compliance Certificate when filing their self-assessment tax return to obtain their SEIS relief. This typically takes place later – in line with the end of the tax year – but remains the investors’ responsibility rather than the company’s – most investors will already have their own accountant, who can handle this part of the process for them.
Right, now that all the boring stuff has been taken care of, you can focus on running your company. As part of a well-run company at any stage, you should ensure that there is proper corporate governance instilled from day one. Key to this will be the creation of a Board - if there is not one already in place. A Board should be balanced between Management, non-executive Directors (NEDs) and observers. Independent NEDs are important because they provide objectivity and bring a wider experience to the Board, which enables the directors, if necessary, to challenge the Board and provide a commercial reality check. The CEO is responsible for running the day-to-day business of the Company, maintaining good communication with the Board and ensuring the Company’s business plan is achieved. Board meetings should ideally be held regularly once a quarter –scheduled well in advance – and emergency Board meetings can be held when appropriate.
It is also critical that, outside of Board meetings, you keep all shareholders up to date with the latest developments. This can be easily achieved through regular updates that can be sent out via email – ideally, once a month. It is important to note that these do not need to be essays. A brief update around commercial, financial and operational developments suffices, and doing so regularly will go a long way with your investors – which will be critical when you seek further funding.
With all this in place, all that’s left for you to do is hit the ground running and make sure you make the best use of all the new cash that you now have available.