Venture Bonsai Legal Framework

8/7/2019 Venture Bonsai Legal Framework

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LEGAL FRAMEWORK

FULL VERSION

Selected Venture Bonsai Partners

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eHBBusiness Engineering


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1. Legal Disclaimer

VENTURE BONSAI (WE) HAS PROVIDED THIS DOCUMENT WITH THE RELATED

ATTACHMENTS FOR INFORMATIONAL PURPOSES ONLY. WE DO NOT PROVIDE

ANY KIND OF LEGAL OR FINANCIAL ADVICE.

YOU ACCEPT, BY CONTINUING READING THIS DOCUMENT, THE FOLLOWING

TERMS.

THESE DOCUMENTS ILLUSTRATE THE GENERAL LEGAL FRAMEWORK WHICH

IS AVAILABLE WHEN YOU ARE USING VENTURE BONSAI SERVICE. THERE MAY

BE DIFFERENCES IN THE LEGAL REQUIREMENTS DEPENDING ON THE

DOMICILE OF YOUR COMPANY. WE TAKE NO RESPONSIBILITY OF ANY ERRORS,

SPELLING MISTAKES OR OTHER ISSUES RELATED TO THESE DOCUMENTS.

IT IS GENERALLY ADVISED THAT YOU WILL ONLY USE THE ACTUAL FULL

VERSIONS WITH A VENTURE BONSAI CERTIFIED ADVISOR.

THESE DOCUMENTS ARE INTELLECTUAL PROPERTY OF VENTURE BONSAI OY

AND YOU DO NOT HAVE ANY RIGHT TO USE THESE DOCUMENTS UNLESS

WITHIN THE SCOPE OF SERVICES PROVIDED BY VENTURE BONSAI.

CONFIDENTIAL. Copyright 2011 Venture Bonsai Oy. Version 250101! Page 2 (12)


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2. Venture Bonsai Legal Framework

The purpose of the Venture Bonsai Legal Framework is to provide a set of ready-to-use

documents and an as simple as possible process to run a Share Issue to raise private

capital for a growth company. The process is in compliance with the European Union

regulation and related national laws.

!is framework is built in such a way that the Share Issue can be arranged within

the service as easily as possibly while following the regulation related to private

placements within the European Union.e example documents have been built

in such a way that they can modied to meet the minor dierences in each

national legislation.

e example documents are built for companies domiciledin Finland.

Detailed and full version attachments (as referenced in this document) are

available to Venture Bonsai customers and partners.

When running a Share Issue within Venture Bonsai, you will

Let the Shareholders Meeting authorise the Board of Directors to run a Share Issue

(template provided).

Let the Board of Directors decide to run a Share Issue (template provided).

Prepare your Marketing Material for the Investment Round.

Use Venture Bonsai to accept interested users to Potential Investors as well as invite

your own contact to Potential Investors.eres a legal limit of 99 potential investors

per country which is enforced by the system.

Receive the investments into a safe Escrow Account held at a major bank.

When the round is successful, make the necessary decision by the Board of Directors

to accept the subscriptions.

e company will receive the money as soon as the auditor has veried the

investments

You will inform the new shareholders about the good news!



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3. Preparing for the Investment Round

3.1. Preparation Phase within Venture Bonsai

The Venture Bonsai service guides you through each step while setting up your investment

round. You will upload to the service the official documents mentioned below, have them

checked by a Venture Bonsai authorised lawyer and you can start your investment round.

There are also other documents to be uploaded (such as business plan and company

brochures) at this stage, but they are not covered by this document.

3.2. Resolution of the Shareholders Meeting regarding the Share Issue

Authorisation

We assume here a model where the Shareholders Meeting decides to authorise the Board

of Directors to arrange a Share Issue. The authorisation is valid until a certain date. This

model enables the Company to run several investment rounds with a single authorisation

(each investment round still requires a separate board decision).

Typically the decisions need to be also in the official language of the country of the company.

To keep this short, we have omitted the Finnish language texts (available for Venture Bonsai

customers).

It was resolved to authorise the Board of Directors to make resolution on an issue of newshares of the Company. The shares may be issued or distributed against payment or at no cost.

The authorisation includes the right to issue stock options and other instruments that entitle toreceive new shares or the Companys own shares in the possession of the Company against

payment.

The maximum number of new shares that may be issued under the share and special rights

authorization may not exceed the amount of [number of shares].

Template for the Shareholders Meeting is available for Venture Bonsai customers. isdocument will be uploaded to the Venture Bonsai Data Room as part of the round

preparation.



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3.3. Register the Authorisation to the Trade Registry

The authorisation given above needs to be registered into the Trade Registry. The company

will receive a Trade Registry Extract with this authorisation. This document will be uploaded

to the Venture Bonsai Data Room as part of the round preparation.

3.4. Resolution of the Board of Directors regarding Initiation of Share Issue

The Board of Director must always make a decision to start an investment round. We

use the so called book building model which is a simple model, fitting also the equity

crowdfunding process where relatively many investors will invest money in the company. The

Book Building model is a process where all the subscription commitments are received during

the subscription period, and accepted by the Board of Directors.

Based on the authorisation, the company can now decide on the share issue. Again, the

decisions need to be also in the official language of the country of the company.

Here is an extract from the decision to be made:

It was resolved to initiate preparations for a directed share issue (the procedure hereinafter

called the Share Issue). The Share Issue includes the possibility to make subscriptioncommitments for new shares in book building procedure.

Willingness to subscribe new shares is documented by way of delivering a subscriptioncommitment for new shares and by payment of the subscription amount by [dd].[mm].[yy] asinstructed by the Company. [The Board may extend the period for submitting the subscriptioncommitments and the payment period of the subscription price.]

The Board makes resolution on approval or rejection of subscription commitments entirely orpartially and on execution of Share Issue (directed share issue) in a separate meeting to be heldapproximately on [dd].[mm].[yy]. The Board may also at any time terminate the Share Issue bynotice thereof to the parties that have been given the opportunity to make subscriptioncommitments. The amount of shares to be issued in Share Issue is minimum of [number] shares

and maximum of [number] shares. The subscription price of shares is registered entirely to thefund of unrestricted invested shareholders equity.

Template for the Board of Directors meeting is available for Venture Bonsai customers.is document will be uploaded to Venture Bonsai Data Room as part of the round

preparation.



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3.5. Get the Round Accepted

In order to launch the Investment Round, you will have it verified by Venture Bonsai. At the

same time, you will make an agreement with Venture Bonsai concerning the use of the

software.

3.6. OPTIONAL Company Health Check (also known as Vendor Due Diligence)

Purpose of the Company Health Check and the related attachments is to increase the

level of trust in a company which is looking for funding within the Venture Bonsai

service.

!e Company Health Check has been designed to be easy-to-complete, payingattention to those facts that both are easy to ll or obtain (by the company) and

on the other hand, increase the condence in the company by a potential

investor. In order to be as trustworthy as possible, these facts should always be

veried by an external lawyer (by a Venture Bonsai certied partner) as

instructed within the service.

e Company Health Check Template is available for all Venture Bonsaicustomers.



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1. Running the Investment Round

After having the round verified, you can launch it!

You can now accept (each individually) the Venture Bonsai users willing to see the investment

round documentation (to become Potential Investors) or invite your own contacts directly to

the round.

Please note that you can only accept users Into Potential Investors from such acountries as accepted to be investors to your home country (Company Domicile).

You and the Potential Investors can discuss in a private discussion group in order to cover the

questions and answers not already covered by the documents. This also helps you (as an

entrepreneur) to follow the law requiring to keep each investor equally informed concerning

all information you have disclosed to one of them separately.

When a Potential Investor makes an investment (presses the Invest button), he willreceive in his email

Deed of Adherence (to the Shareholders Agreement) to be lled in and signed

electronically

Subscription Commitment to be lled in and signed electronically

Payment instructions to transfer the money to the escrow account

Separately

e Escrow Agent will conrm arrival of the money

Arrival of signed documents and money is registered to the system

1.1. Invitation to make Subscription Commitment

The Subscription Commitment document describes all the initial facts (for example, minimum

and maximum number of shares to be issued and deadline of the round) of the investment

round and is shown to each Potential Investor in the Data Room before the investment

decision.



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Potential Investor is any Venture Bonsai user who has requested to view the Investment

Round information and the Company/Entrepreneur has accepted (after considering the

background and connection to this person) this request. This means that only those persons

accepted by the entrepreneur can see the confidential information concerning the round.

Template for the Invitation to the Subscription Commitment is available for VentureBonsai customers. is document is uploaded to the Data Room.

1.2. Subscription Commitment

The actual investment by a Potential Investor is done with the Subscription Commitment. The

investors agrees here with the terms of the investment round.

This document is signed by the investor electronically (by using the EchoSign system).

Template for the Subscription Commitment is available for Venture Bonsai customers.e Subscription Commitments are signed electronically.

1.3. Shareholders Agreement

Venture Bonsai provides a template for multi-party Shareholders Agreement. Its been built

such a way that it is acceptable for both the investors and entrepreneurs.

!e Company or its Lead Investor may already have a Shareholders Agreement

they want to continue using with the Venture Bonsai issue. at is possible, even

though not recommended.

e minimum requirement is that this agreement enables new investors to

join the agreement with the Deed of Adherence.

The Venture Bonsai Shareholders Agreement (SHA) is especially suitable for investment

rounds as it has been built such a way that

Its simple. There is only one series of shares and there are no complex liquidation

preferences or alike. This kind of matters would be difficult to understand by private

investors.



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Its modular. This SHA can modified with relatively small changes to meet the

requirements of different national laws. All those parts that typically need to be changed

are clearly marked. The reference implementation corresponds to the laws of Finland.

It enables a Lead Investor. If you already have a Lead Investor, this SHA is built with

that provision in mind. If you dont have a Lead Investor, the SHA defines any party

who invests at least 30% of the round (along with some other requirements) as the lead

investor. This is always subject to the decision of the board in the end.

Small investments are handled as financial investments which means that these

minority shareholders need to follow the majority in case of for example new

investments or company trade-sale. In short, they have all the legal minority protection

but no other power, its just money.

It enables Angel Liquidity. This SHA enables share transactions between the existing

shareholders and enables the sale of some early stage investments to the a later stage

VC (angel liquidity).

Template for a standardised (modular structure allowing customisation)

Shareholders Agreement is available for Venture Bonsai customers.

1.4. Deed of Adherence

Typically, the investor is required to sign the Shareholders Agreement in order to invest in

start-up companies. This is arranged so that the actual Shareholders Agreement (SHA) is

signed by all the existing shareholders, is shown to each potential investor and the investor

needs to join this agreement with what we call Deed of Adherence document.

IN FAVOUR OF the parties to the Shareholders Agreement regarding [Company Oy]

(the Company) dated [dd].[mm].[yy] (the Shareholders Agreement).

THIS DEED WITNESSES AS FOLLOWS:

(i) Investor confirms that he has read and understood the Shareholders

Agreement;

(ii) Conditional only to the Investor becoming holder of shares in the

Company, the Investor covenants to the parties to the Shareholders

Agreement to perform and be bound by all the terms of the



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Shareholders Agreement as if the Investor were a Shareholder and

Minority Shareholder as defined in the Shareholders Agreement;

(iii) ....

Standard Deed of Adherence document is available for Venture Bonsai customers.is document will be signed electronically by each investor.



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2. Closing the Investment Round

After either the final date of the subscriptions has arrived, or the maximum number of the

shares is subscribed, the investment round will be closed. Venture Bonsai will send you a

complete list of all persons (with details) who have subscribed shares.

Next, the board needs to decide on the Share Issue and allocate the shares. Remember, the

board still has the full authority to accept or reject any investment even though the first

come, first served principle should be the main principle.

2.1. Resolution on Share Issue

After the Investment round is complete, the Board of Directors will decide on the allocation

of the shares to the investors. Even though the main principle here is first come, first

served, the board has full authority to allocate the shares in such a way as it sees suitable.

Example text of the board decision:

It was noted that the Shareholders Meeting [dd].[mm].[yy] resolved to authorise the Board ofDirectors to make resolution on directed issue of shares.

It was resolved to offer for subscription maximum of [number] new shares regardless of the pre-emptive subscription right of the shareholders according to Appendix [number].

The subscription price of each share is EUR [sum] and the maximum total subscription price ofthe shares is EUR [sum]. The shares must be subscribed and paid for by [dd].[mm].[yy], unlessthe Board of Directors extends the subscription or payment period. The subscription price isregistered entirely to the fund of unrestricted invested shareholders equity. The subscription

price is based on the agreement between the Company and the subscribers.

The reason for issue of shares is to strengthen the capital structure of the Company. Thereforethere exists a weighty financial reason to deviate from the pre-emptive subscription right of theCompanys shareholders.

The subscribed shares are subject to redemption [and consent] clause[s] of the Articles ofAssociation. The Board of Directors may decide on other issues related to the issue of shares.

Template for the Board of Directors meeting is available for Venture Bonsai customers.

2.2. Releasing the Funds

After the board has made the decision above, and the auditor has confirmed that all

investments have arrived to the escrow account, they will be released to the Company. In case



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the investment round is NOT successful, the money will be returned to the investors. The

Company is responsible for the cost of transactions required for returning the money.

2.3. Inform the New Shareholders

The final step of a successful investment round is to inform the new shareholders of your

company.

You should send each shareholder an email with your own message, together with at least an

up-to-date copy of the list of shareholders.

Venture Bonsai system will provide you with all the information needed to create your

List of Shareholders, including

Name

Full Address

Domicile

Social Security Number

Email

Number of Shares Subscribed

Date of Subscription

Conrmation of having signed the Deed of Adherence


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