Many of the clients we talk to want to share equity with some or all of their team. They agree that it’s the right way to go, that everyone benefits when they have a piece of the pie, a slice of the action. But for one reason or another, they haven’t got round to setting up a share scheme, just yet.
Or they are perturbed by past experience. Traditionally, the process is costly, complicated and time-consuming. Staying afloat in a sea of paperwork and chasing lawyers/accountants for answers while simultaneously managing a burgeoning start-up is no mean feat.
And lots of those who single-handedly attempted it in the past, later discovered that their scheme was never compliant. But that was then, and this is now. Things have changed.
It's the age of digitisation. We now have the technology to digitise processes to make things simpler. Like auto-generated documents, automated notifications and electronic signing to make admin easier.
In this blog, we explore how digital equity management platforms like Vestd are revolutionising the way equity is shared.
No need for lawyers and accountants
Not any more. Typically in the past, to set up a share option scheme like EMI, a founder would enlist the help of either a lawyer or an accountant (in-house or third party). Some lawyers and accountancy firms offer equity management services, and some don’t. That’s one obstacle.
Designing and managing a share scheme requires a combination of legal documentation and tax considerations, so the whole process actually sits somewhere between the two professions, just to add to the confusion.
Naturally, this equates to lots of conversations back-and-forth plus time and money spent. Fees can spiral out of control.
With a digital equity management platform like Vestd, there is no need to reach out to a lawyer or accountant for help. Our specialist in-house team can take care of valuations and provide industry-standard legal docs (more complex schemes may require external support).
Digital documents electronically signed
In the past, a lot of the pain of manually managing a share scheme was in the paperwork. Every share scheme is different, but in the case of EMI, resolution agreements, option agreements, valuations and annual statements are required (among other things). You can download our free EMI share option scheme checklist here.
So, those who wished to share equity would have to distribute, collect and collate all of that documentation. And every shareholder needs a signed copy. A time-consuming endeavour with potential human error and misplaced pieces of paper.
Recognising the need to do things differently, we created the UK’s first and only regulated digital share scheme platform. Since then, others have followed suit, and it’s easy to see why. Digital equity management is a modern solution to a bureaucratic nightmare.
Agreements are auto-generated in minutes, recipients can sign them electronically and receive their share certificates, and admins can submit statements or update HMRC or Companies House through the platform.
Design the scheme online
Designing a share or option scheme has been daunting in the past. Business owners need to decide how much of their company equity they should set aside, how many shares each recipient should receive, what the vesting schedule should look like and consider the impact of dilution. So why not manage all of these conditions on a guided digital platform where it’s much easier to visualise, manage and monitor it all?
Vestd is designed with compliance in mind. The platform accounts for the number of shares (or options) allocated to stop admins from exceeding those limits. The platform also prevents the submission of out-of-date valuations and anything unauthorised being issued.
Better still, ours is the only platform with complete Companies House integration to make the whole process more straightforward. It will also prompt company admins to action important tasks, such as annual submissions to HMRC, and it will keep track of the necessary data you need to submit.
A share scheme set-up, designed and managed digitally, is a lot less hassle and stands a better chance of remaining compliant.
Existing schemes can be digitised too. If you have already enlisted the services of a lawyer or accountant, fear not, as you can upload existing documentation to the platform for safekeeping. You can grant key advisors access too, to manage the scheme via Vestd.
In a not too distant past, recipients of shares or options would place a copy of their agreement or share certificate in a drawer and forget about it until an exit event.
That's another thing that's dramatically different about a digitised scheme like Vestd - visibility. Recipients can access their own shareholder portal with a dynamic dashboard that displays a clear, visual representation of their shares as they vest.
They can even add a projected share price to understand the future potential of those shares. No more out of sight, out of mind. With a digital platform, it’s easier to see and better understand what the pot is - and might be - worth.
Business owners can incentivise teams with their employee share scheme better if they can visualise their options. And don't worry, sensitive information doesn't have to be disclosed. The Vestd dashboard can display information on a need-to-know basis.
Sharing ownership doesn’t have to be a hassle like it was a couple of decades ago. With a digital equity management platform like Vestd, it’s much easier to manage popular employee share or option schemes like EMI.
Clever functions like auto-generated documents and digital dashboards mean that the whole process is a lot smoother. Vestd offers guidance from start to finish and lifetime support. Let us help you to share equity.