FINAL SIGN OFF - THE COMPLETION DOCUMENTS

THE COMPANY BIBLE

Once everything is agreed and the lawyers have produced the final set of completion documents, known as the ‘company bible’, then all that is left is to sign them off. This is the final stage – the investment is not guaranteed until these are all signed.

They will be signed off by the founders, University and investors. There may be rather a lot of them so here is a brief overview of what could be in the file and some notes on things to watch out for.

At all times remember that these are legal documents so ask the lawyers about anything you are unsure of. This is a high-level overview of what might form part of the completion set and is for general information purposes only. It does not, and is not intended to, be construed as offering any legal advice.

1 / Shareholders Agreement

This document outlines the relationship between the shareholders and The Company. It provides a comprehensive framework for governance, decision making (including consent levels) and the future of the company. It will also describe the nature of the warranties required by the investors of the company founders and the appointment of directors to the board.

2/Business Plan

This is a more formal version of the slide deck presented to the investors. It may be a requirement to produce one as part of the warranties described in the Shareholders Agreement.

It is likely that the University will have a template you can follow but it covers the following sections:

i) Business Details

ii) Executive Summary

iii) Technology Overview

iv) Markets and Competitors

v) Strategic Management

vi) Operations and Financials

vii) Risk assessment

viii) Exit Strategy

3/ Articles of Association

This is a fundamental document of a UK Ltd company which describes how the company is run, governed and owned. It would typically cover share rights (including variations, sale and transfers), directors (including decision making, appointments and removals, interests and conflicts), indemnity and benefits, dividends and delivery of documents and information.

4/ Technology License

This is the agreement between the University and The Company for the license of the patent and other intellectual property (for example, know-how or test materials) to The Company. It will cover the filing and maintenance costs, confidentiality, royalties and other payments due to the licensor, termination and liabilities.

5/ Assignment Letter

This sets out the understanding between the University and The Company regarding possible future assignment of the technology to a third party. For example, if The Company is acquired.

6/ Due Diligence Questionnaire (or Company Warranty)

It is likely that the investors will ask the founders to sign off a due diligence questionnaire. It’s common for a company to be formed as a legal entity, i.e. a limited company, prior to the investment. The founders would typically form the company with a nominal cash holding and share capital so it would have a bank account and a company number. The company’s accountant would handle the filing with Companies House.

The company wouldn’t be operative at this stage – it would be a shell holding (for example) £100 covering 10,000 shares of which the directors would be the founders. However, it is a legal entity that can act as a vehicle for subsequent investment.

This questionnaire would cover the company’s affairs, any liabilities or assets, intellectual property, insurances etc. There won’t be any of these if it’s held as a shell but this will need to be stated.

7/ Founders Declaration (or Personal Warranty)

Each founder is likely to be given a personal warranty or declaration questionnaire to complete and sign. It will cover personal details relating to financial affairs, employment and directorships, litigations or disputes and possibly some miscellaneous questions.

If in any doubt regarding any answer consult with the lawyers closing the round.

8/ Consulting Contracts

If, for example, a founder is staying within the University but is acting as a consultant for the new company this document will set out responsibilities, rates and terms of payment.

9/ Service Agreements

If a founder is leaving the University to join the new company, then there will be a service agreement to this effect. This is a standard contract of employment.

10/ Board Minutes

Prior to signing off the documents, the company directors are the founders who have the shares in the shell company. The board minutes reflect the Board’s decision to approve the investment and subsequent allotment of shares, and the approval of The Company’s new articles of association. It will accept the other documentation involved in the completion of the round and authorise the lawyers to make the relevant submissions to Companies House. It will also authorise the lawyers to prepare and issue the share certificates to the various parties. These will be summarised as a ‘Written Resolution’ presented to the founders for consideration.

The lawyers will draw up the board minutes which will be signed by one of the founders at the time of completion.

11/ Written Resolution

This is the document, signed by the founders, that states the founder’s authority to enter into the resolution and the acceptance of the new articles of association and investment.

12/ Share Certificates

The new share certificates are signed and witnessed and that is the end of the process.

This is an overview of what you would expect to see on completion day but there may also be other documents that form part of the bundle depending on the specific nature of the funding round. For example, ones that cover EIS applicability, director’s appointments and return of share allotments. These will be drafted by the lawyers and accountants.

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