Guy Wilmot from Russell Cooke LLP talks about startup law at Dreamstake Academy.
Business vehicles
- Limited Company
- LLP
- Partnership
- Sole Trader
Limited company responsibilities
Filing requirements
- Annual accounts/return Directors’ Duties
- Act in the best interest of the Company
EIS/SEIS - (Seed) Enterprise Investment Scheme
- Tax benefits for UK based investors
- No preferential right of return (!) - investors don’t get money out first
- SEIS: even more generous tax based, but only for first two years and up to 150k
Shareholders Agreements/Articles of Association
- Articles are a public documents while shareholders agreement are private
- Directors/Board members
- Veto/Consent rights
- Exit of founders: Death/Illness/Disputes
- Dividends
- Restrictive covenants: prevent competition/poaching
- Share transfer rules
Share Transfer Rules
- Pre Emption rights: right to maintain same ownership on investment/transfer (e.g. founder leaving) by paying for additional shares
- Drag/Tag rights
- Founder lock-in period/reverse vesting
Intellectual Property Rights
- Patents
- For inventions with a practical application
- Monopoly rights for 20 years in exchange for disclosure
- Trade Marks
- Exclusive rights to use name/logo/…
- Must not descript a good or service
- Copyright
- Free, Automatic and Global
- Must be original and require minimum of effort
- Confidential Information
- not an IP right, but founders often think of their ideas as IP
Employees and Contractors
- Employees:
- Holiday, Family Leave, Protection from Dismissal
- Contractors:
- More flexible, no pay roll setup
- Tests for self-employment
- Own equipment
- Can set own hours
- Interns
- Must be paid minimum wage unless
- Intership is part of a UK based student program
- Intern is actually a worker for a charity worker
- Intern is only observing and not doing work
- Must be paid minimum wage unless
- Advisors
- Need to define role/time commitment
- Paid in equity (.5%-2%)
- Share Options
- Nearly always better to give options rather than giving equity directly
Protecting the business from liability
- Liabiliy for physical products
- Services
- Negligence
- Online/User Platforms
- User generated content
- Defamation/IP infringment
- Data protection: privacy policy
- Don’t monitor content pre-publication: no liability as long as there is a notification and take down process
- Consumer Protection Law