The Trade Register's ready-made set-up package or self-drafted documents?
The majority of the founders of limited liability companies use the guided set-up package (Link leads to external service) provided by the Trade Register, where the memorandum of association and especially the articles of association are quite simple. Since the articles of association determine how the company will be managed and how decisions will be made in the future, it is important to check whether this standard version is sufficient or whether changes are needed.
In some cases, the ready-made startup package is not suitable at all. More information on this can be found on the Trade Register's website(Link leads to external service), for example.
The memorandum of association determines the shares and share capital
In the Trade Register's guided memorandum of association, the company has no share capital. This can be useful because it allows you to change the capital without changing the number of shares. The entry of new shareholders and investors will be facilitated when the shares can be freely priced in an issue of shares.
Sometimes, however, it is desired to determine the nominal value of the share, in which case the company receives the initial capital in the form of share capital. This is not the only financing method – shareholders can also finance the company's operations with loans or equity loans.
It is important to consider the number of shares. The minimum is one share, but in practice a larger number, such as a thousand shares, gives flexibility to share ownership between current and future shareholders. The number of shares may be changed later by a resolution of the general meeting.
The articles of association determine how decisions are made
The articles of association, another important document, defines the name, domicile and industry of the company. The industry should cover all areas of the business that the company intends to carry out. If the company develops software but also invests in securities, this is worth mentioning under the industry. Otherwise, the Board of Directors may be held liable if the investments fail because the operations do not correspond to the area defined in the articles of association.
It is also important to agree on the principles of decision-making in the articles of association. According to the Companies Act, the Board of Directors represents the company, but the standard articles of association may specify who may act on behalf of the company. It is often recommended that decisions are made by two people, such as the Managing Director and a member of the board together. However, this does not prevent the Managing Director from making smaller operational decisions under the authorisation on the basis of one's position.
Redemption clause
If the shareholder intends to sell their shares to a third party, the redemption clause is an important safeguard. The standard set-up package of the Trade Register includes a redemption clause, but in startups, a more detailed redemption procedure and price determination is often done in the shareholders' agreement(Link leads to external service).
Share register and shareholders' register
The information on the company's founders and first shareholders, which is recorded in the company's memorandum of association, initiates an important task: maintaining the share register and the shareholders' register. According to the law, each limited liability company must have an up-to-date list of shareholders. This facilitates share trading and ownership registration.
The new owner needs the approval of the Board of Directors in order to enter the company's share and shareholder register, and the transfer of ownership document, such as the deed of sale, must be presented to the Board of Directors. In addition, transfer tax must be paid.
It is a good idea to start the maintenance of the share and shareholder register right from the beginning. It can be done in Excel or Word, for example, and stored in the same place as other documents needed for the Due Diligence process.
