Memo and Articles: trading company with vesting shares
This "memo and articles" document is for a trading company with a structure using "vesting" shares which will acquire full rights only after participation or contribution by a shareholder over a period of time. This template provides a reasonable, practical and balanced framework to manage and control the company, while protecting the shareholders and interest of the company.
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Memorandum and articles using vesting shares
Vesting is a concept describing a situation where a shareholder starts with shares of low value. The shares are convertible on the happening of a specified event. The trigger event could be satisfactory work and involvement for a period of time, or just the passing of time, or the achievement of a particular target.
The articles of any company provide the framework for its operation. Any terms as between shareholders should be covered in a shareholders’ agreement. We assume that this will be the case here, when you decide on the exact terms for vesting the shares.
This set of articles is perfect for any new or existing company. It does not matter what business is operated by your company nor how many shareholders you have. Vesting shares can be used for some shareholders or new shareholders, or all of them.
The vesting structure is managed by creating deferred convertible shares which convert to full A shares on the happening of a trigger event.
Are these articles suitable for your company?
Use this document for a start-up or old company, for a trading company, website trader, international exporter, airline operator, car seller, or any other.
Your choice should be about what you will need in the next few years and no necessarily what you minimally need today. You need this set of articles because the entire document has been prepared with a view to setting appropriate structure, checks and balances for a company intending to use the vesting concept.
We have therefore provided a structure to protect every shareholder - not in a way that will “upset the apple cart” but so that each shareholder knows not only what is his entitlement but how it is limited.
Some examples to use this set of articles:
- where shareholders have control over the company
- where most or all of the directors are shareholders
- to commence business without a fear that some shareholders may not leave early
- to bind the shareholders from transferring his shares for first three years
- that each shareholder should provide his time expertise for the progress of the business at least for 2 years
- an outsider (other than the founders forming the company) should not be able to get the shares unless the company has achieved some target.
The articles you buy now, in this document:
- are suitable for incorporating a new company or for changing an existing company.
- provide options you may choose for vesting shares.
- contain modern provisions in plain English.
- allow you to construct your memorandum and articles of association to suit your exact business needs.
- are full of practical and commercial help and suggestions.
- include draft minutes of a general meeting to change the articles. (Free bonuses from the Net Lawman).
Use a shareholders’ agreement too
As we have said, the articles of association of a limited company are its legal “constitution”. They are a framework within which the company must be managed. They can be changed - but only with the consent of at least 75% of the shareholders.
Within that framework, you need to set the rules for the detailed relationships between directors, shareholders and the company. To regulate those relationships, you need a shareholders agreement.
Alternative versions of company articles
If you are merely exploring the possibility of using vesting shares, you may be interested in alternative forms of articles. Read all about them at [link to menu doc]. Each set covers a different scenario, and creates a unique structure.
Articles of Association: limited company (ltd) by shares is suitable for a company with shareholders in control with several directors and possibly some shareholders who are not directors. This is the “plain vanilla” version which will be used by most companies.
Mostly private companies are limited by shares. However, if you want a company through which to operate a charity, club or non-for-profit association you will require articles for a company limited by guarantee.
This document was written by a solicitor for Net Lawman. It complies with current English law.
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