7 Essential Tips for Hiring New Staff: A Guide to Navigating the Hiring Process


Hiring new staff is a critical and challenging task for any business. The right team can propel your company to new heights, while missteps in the hiring process can lead to costly setbacks.

Here are seven essential tips for hiring new staff and leveraging valuable resources (like Zegal’s comprehensive guides and templates!).

Number 7 is a game-changer.

1. Clearly define the role

Before starting the hiring process, clearly understand the role you’re looking to fill. Detail the job responsibilities, required skills, and desired experience level.

This clarity will help you and potential candidates understand whether there’s a good fit. A well-drafted Employment Contract can serve as a foundational document outlining these details, ensuring both parties are aligned.

2. Embrace diversity

Diversity in the workplace drives innovation, creativity, and resilience. Ensure your hiring practices are inclusive by reaching a broad audience and implementing unbiased screening methods. This approach enriches your team’s dynamics and broadens your company’s perspectives and capabilities.

3. Leverage social media and professional networks

Social media and professional networks are invaluable tools for reaching potential candidates. Platforms like LinkedIn allow you to access a vast talent pool and help you gauge a candidate’s professional background and network before making contact.

4. Implement a thorough interview process

A robust interview process is crucial for assessing a candidate’s suitability beyond what’s on their resume. Consider a mix of technical assessments, behavioural interviews, and team interactions to evaluate skill and cultural fit.

Remember, an interview is a two-way street; it’s also an opportunity for candidates to assess your company and team.

5. Offer competitive compensation and benefits

To attract top talent, your offer needs to be competitive. This doesn’t mean offering a high salary; consider how Share Option Plans can be an attractive addition to your compensation package, providing long-term incentives for employees to grow with your company.

When you decide to extend this offer, using a structured ESOP Employee Acceptance Letter ensures clear communication regarding the terms and acceptance of the share option plan, fostering transparency and mutual agreement.

6. Develop a comprehensive onboarding process

Once a candidate accepts your offer, a comprehensive onboarding process is critical to their success and integration into your team. 

This includes everything from setting up their workspace to providing clear company culture and expectations guidelines. An Employee Handbook can be very useful in this phase, offering new hires a detailed guide to your company’s policies, culture, and values.

7. Knowledge can be taught, ability is crucial

In the rapidly evolving tech world, the ability to innovate and solve problems often outweighs the knowledge of specific programming languages or technologies. Consider the story of a developer during a rigorous technical interview. Faced with a coding test beyond his current knowledge, instead of giving up, he cleverly hacked into the test’s database to find the answers.

Although unconventional, his approach demonstrated remarkable problem-solving skills and a can-do attitude. This story serves as a potent reminder: You don’t need someone with all the answers; you need someone who can find them.

Conclusion

Hiring the right staff is a nuanced process that requires careful planning, execution, and follow-up. You can build a strong, dynamic team by clearly defining the role, embracing diversity, leveraging digital platforms, conducting thorough interviews, offering competitive compensation, ensuring a smooth onboarding process, and fostering continuous development.

Resources like Zegal’s legal templates, share option plans, ESOP Employee Acceptance Letter, and employee handbooks can provide valuable support at each stage of this journey, ensuring you’re well-equipped to make informed, strategic hiring decisions.

What Are Pre-emption Rights in UK Law?


Shareholders often benefit from pre-emption rights, which grant them the first refusal when new shares are issued by the company. When shareholders possess pre-emption rights, they hold an advantage over other potential investors when new shares are initially offered to them.

This implies that new shares cannot be offered to others without being extended to the existing shareholders. Whenever a company issues new shares, it must ascertain whether pre-emptive rights are in place.

Shares are typically offered in proportion to their current shareholding. 

For instance, if a shareholder owns 25% of the shares currently issued, they are entitled to a first refusal right over 25% of any new shares being issued.

When an existing shareholder opts to acquire these rights, they can maintain their percentage shareholding within the company. This article explores pre-emptive rights, their types, benefits, and other associated concepts.

Example of pre-emptive rights

Consider a company’s Initial Public Offering consisting of 1000 shares. An individual purchases 100 of these shares, equating to a 10% equity interest. Subsequently, the company offers an additional 5000 shares.

A shareholder with pre-emptive rights can purchase a sufficient number of shares to protect their 10% equity stake in the company. Assuming the issues are priced similarly, this would mean acquiring 500 shares.

Types of pre-emptive rights

Pre-emptive rights in a contract can take one of two forms: the weighted average provision or the ratchet-based provision.

  • Weighted average provision: This allows the shareholder to buy additional shares at a price that reflects both the original and new share prices. The weighted average price can be calculated using either the narrow or broad-based weighted average.
  • Ratchet-based provision: This provision enables shareholders to convert preferred shares to new shares at the lowest sale price of the new issue. If the new shares are priced lower to maintain the same level of ownership, the shareholder receives a more significant number of shares.

How can pre-emption rights arise?

Pre-emption rights can originate from three sources:

  • Statutory pre-emption rights: Provided under the Companies Act 2006 in sections 561 to 576. These rights automatically apply to equity securities where dividends vary according to the company’s profits, and there is no special right to capital repayment upon the company’s winding up. Exceptions include:
  • Within the articles of association of a company: Statutory pre-emption rights can be altered or disapplied by a company’s articles of association, which then take precedence.
  • Under a shareholder’s agreement.

What procedure is followed to issue shares if pre-emption rights exist?

If pre-emption rights exist, a company has two options: follow a specified procedure to honour pre-emptive rights or bypass them.

Typically, when offering new shares, the company opts for allowing existing shareholders to purchase shares first, granting them the right of first refusal, as discussed earlier. Even if the existing shareholders decline the new shares, a procedure must still be followed.

Where pre-emption rights are specified in the articles of association, these documents should also outline the procedure to be followed. However, the most common approach is to send a rights letter to existing shareholders to apply for the shares, who can then accept the offer through an application letter.

If the rights are statute-based, a minimum of 21 days must be provided to accept the offer. A minimum acceptance period may be defined for rights specified in the articles of association.

How can the company remove pre-emption rights?

Directors might circumvent the pre-emption procedure, which can be lengthy, costly, and cumbersome. Pre-emption rights can be permanently removed by a private company amending its articles to either eliminate an explicit provision or state that statutory pre-emption rights do not apply to the company’s shares.

Both private and public companies can disapprove pre-emption rights for a specific allotment, provided a special resolution is passed by shareholders at a general meeting, accompanied by a directors’ written statement outlining the rationale, the allotment’s financial terms, and the justification for these terms.

Typically, the resolution sets both a time and a limit on the amount (or value) of shares that can be issued unconditionally, balancing the directors’ need to allot new shares with the shareholders’ need to retain some control over the share issuance.

What are the benefits of pre-emptive rights?

Preemptive rights primarily benefit investors with a significant stake in the company, enabling them to participate in its decision-making process. This can be particularly valuable for early investors and company insiders, who may be concerned about their fractional shareholding percentage among millions of outstanding shares.

  • The benefit to shareholders: Preemptive rights protect shareholders’ voting power, as the issuance of more shares can dilute company ownership. Shareholders also benefit from insider pricing for new issue shares, which potentially offers a strong profit incentive.
  • Reducing losses through preferred stock conversion
  • The benefit to companies: For new ventures, pre-emptive rights serve as an additional incentive for early investors and offer benefits to the awarding company. It is generally less costly to sell further shares to current shareholders than to issue new shares on a public exchange, lowering the company’s cost of equity and capital and potentially increasing the firm’s value.

An additional incentive for companies is the motivation to perform well and issue new stock rounds at higher prices.

Importance of checking pre-emption in new share issues

Checking for pre-emption rights is crucial to ensure that your shareholding in a company is not diluted without your consent. It also facilitates familiarity with other shareholders, which can be particularly important in scenarios where there are no pre-emption rights on transfer. 

This can potentially lead to unfamiliar individuals becoming co-shareholders. While this may be fine, understanding with whom you are in business is generally preferable.

What is the difference between an investment agreement and a shareholders agreement?

The distinction between an investment agreement and a shareholders agreement is significant in the context of corporate governance and the management of business entities.

Both types of agreements play critical roles in defining the relationships among investors, shareholders, and the company itself, but they serve different purposes and address various aspects of these relationships.

Investment Agreement

An investment agreement, often called a subscription agreement, is primarily a contract between the company and its investors. This agreement outlines the terms and conditions under which the investors will invest in the company. Key components of an investment agreement include:

  • Investment Terms: The amount being invested, the type of shares or securities being issued (such as common shares, preferred shares, or convertible notes), and the company’s valuation at the time of investment.
  • Conditions Precedent: Any conditions that must be met before the investment is completed, such as regulatory approvals or the completion of due diligence.
  • Representations and Warranties: Statements made by both the company and the investors regarding the accuracy of information provided, compliance with laws, and other assurances.
  • Covenants: Obligations undertaken by the company, such as how the investment will be used, ongoing reporting requirements, and other operational commitments.
  • Exit Strategies: Provisions outlining how investors can exit their investment, including rights of first refusal, tag-along and drag-along rights, and scenarios under which the company can buy back shares.
  • Share Vesting: Understanding the nuances of a share vesting agreement is crucial for investors and the company, as these agreements dictate the timeline and conditions under which equity is earned.

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An investment agreement is typically used when new investors are introduced to the company. It details the specific terms of their investment and the mechanics of how it will be executed.

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Shareholders’ Agreement

On the other hand, a shareholders’ agreement is an arrangement among a company’s shareholders. It supplements the company’s articles of association by setting out the rights and obligations of shareholders, the management and operational aspects of the company, and procedures for resolving disputes among shareholders.

Critical elements of a shareholders’ agreement include:

  • Governance and Voting Rights: How decisions are made within the company, including allocating voting rights and establishing quorums for meetings.
  • Share Transfer Restrictions: Conditions under which shares can be transferred, including pre-emption rights and processes for selling or transferring shares among existing shareholders or third parties.
  • Protection of Minority Shareholders: Provisions to protect the interests of minority shareholders, such as requiring supermajority votes for certain decisions.
  • Dividend Policies: Guidelines on how and when dividends will be distributed to shareholders.
  • Conflict Resolution: Mechanisms for resolving disputes among shareholders or between shareholders and the company.

Unlike an investment agreement, a shareholders’ agreement focuses on the ongoing relationship among shareholders and the company’s governance. It is designed to ensure that the rights and responsibilities of all shareholders, both majority and minority, are clearly defined and protected.

Conclusion

While both investment agreements and shareholders’ agreements are crucial in the context of corporate investments and governance, they serve distinct purposes. An investment agreement facilitates the process of bringing new investors into a company and defining the terms of their investment.

A shareholders’ agreement, meanwhile, governs the relationship between shareholders and the company over the long term, detailing the rights, obligations, and procedures that apply to shareholders.

These agreements provide a comprehensive framework for managing corporate investments, shareholder relations, and company governance.

4 Situations That Require a Non-Disclosure Agreement(NDA)


Confidentiality Agreements, commonly known as Non-Disclosure Agreements (NDAs), are legally binding contracts in which the parties involved agree to keep certain information secret. 

NDAs are particularly vital for managing sensitive data and are employed across various sectors, including healthcare, technology, and commerce, for numerous reasons.

Let’s look at some common instances where NDAs are indispensable:

Scenario 1: Using an NDA in Business negotiations

NDAs during business negotiations serve as a formal commitment by all parties not to disclose or misuse the information shared. This is particularly important when considering a business merger or a joint venture, where detailed insights into a company’s operations, financials, strategies, and technological assets are exchanged.

Using NDAs facilitates a transparent and open dialogue, which is crucial for thorough due diligence and accurate assessment of the potential collaboration. It allows each party to understand the strengths, weaknesses, opportunities, and threats associated with the deal, thereby making informed decisions that align with their strategic objectives.

NDAs are about maintaining competitive advantage and safeguarding the integrity and value of the innovations, business models, and market strategies discussed during negotiations.

Further reading: “Does the Law Matter? 5 Fundamentals When Starting a Business”

Scenario 2: Collaboration with external partners

Engaging in partnerships and collaborations is a staple of business growth and innovation. In such instances, a Non-Disclosure Agreement (NDA) is paramount to ensure that all shared information remains confidential and is protected from misuse or unauthorised distribution.

Collaboration with external partners might involve various activities, including joint ventures, product co-development, shared market research, or combined marketing efforts. But regardless of the nature of the collaboration, exchanging confidential information is almost inevitable. To address this, an NDA ensures that both parties agree to use the shared information solely for the partnership and not for any competitive advantage or gain outside the scope of the agreement.

Establishing a Business Collaboration Agreement is a good strategic move in addition to NDAs. This agreement goes beyond confidentiality to outline the entire collaboration framework. It covers roles and responsibilities, resource allocation, intellectual property rights, profit sharing, and the handling of shared data. 

Scenario 3: Employee onboarding and NDAs

Onboarding new employees is a critical phase where individuals are acquainted with the operational, strategic, and cultural aspects of their new workplace. Depending on the nature of the job, this process also involves granting access to sensitive and proprietary business information. 

The significance of NDAs during employee onboarding cannot be overstated. These agreements provide a clear legal framework that helps prevent the unauthorised disclosure of sensitive information during and after an employee’s tenure with the company. 

Moreover, the specificity of employment arrangements can vary, ranging from traditional full-time positions to consulting roles or freelance assignments. Each of these scenarios requires a tailored approach to confidentiality and the protection of business interests:

  • For traditional employment relationships, an Employment Contract incorporating confidentiality clauses and an NDA can establish clear expectations and legal obligations regarding handling sensitive information.
  • When engaging consultants who might be working with multiple clients simultaneously, a Consultancy Agreement with robust NDA provisions ensures that your business’s proprietary information remains protected, even when external expertise is brought in to contribute to specific projects or initiatives.
  • When hiring freelancers, a Freelance Agreement can outline the nature of the work, deliverables, payment terms, and, crucially, confidentiality expectations. This is particularly important given the project-based nature of freelance work and the freelancer’s potential access to confidential information during their engagement.

Incorporating NDAs into these contractual agreements secures your business information and educates new team members on the importance of information security. 

Scenario 4: NDAs for invention sales or licensing

Confidentiality becomes paramount when launching a new product or technology into the market or seeking investment for such innovations.  

An NDA, in this context, acts as a safeguard, ensuring that the discussions surrounding the sale or licensing of your invention remain confidential. This confidentiality is crucial for protecting the intellectual property inherent in your invention and preserving its commercial value. 

By controlling the flow of information, you maintain the competitive edge your innovation brings to the market.

Furthermore, when licensing your software or technology, having a robust framework is essential for defining the terms of use, distribution, and other critical aspects of the licensing agreement.

For these purposes, a Software License Agreement becomes an invaluable tool. This type of agreement complements the NDA by detailing the rights and responsibilities of both the licensor and licensee. It ensures that your software is used in a manner that respects your intellectual property rights while enabling you to monetise your technological advancements effectively.

The importance of NDAs in protecting sensitive business information

NDAs are instrumental in guarding against disclosing information that holds significant monetary value, which could be detrimental to a company if leaked. These secrets can be both technical and commercial. In the event of a breach, an NDA provides legal recourse, enabling you to seek compensation.

Beyond these specific examples, NDAs are also crucial for defining confidential information and setting expectations for its handling, thereby offering a clear framework for protecting vital business data.

How to successfully implement legal tech into in-house legal teams


The emergence of Legal Tech, or LawTech, represents a significant shift in the legal profession, mirroring the impact of FinTech on the financial industry.

Improving technology remains a top priority for legal firms, particularly in-house legal teams. This deep dive addresses questions about Legal Tech and its implementation.

Legal tech, not to be confused with legal for tech, refers to a suite of technologies designed to support, supplement, or outright replace traditional methods for delivering legal services and improving operational efficiency.

The Solicitors Regulation Authority (SRA) has recognised legal tech potential to revolutionise the legal landscape, offering parallels to the FinTech revolution in finance.

With the market already worth an estimated $28 billion in 2022 and expected to grow, legal tech’s scope for expansion and innovation is vast.

The integration of legal tech offers many benefits to the legal industry.

Efficiency gains

One of the most significant advantages of legal tech is its ability to streamline operations. It automates routine tasks such as searching for contract terms or generating timelines, reduces the administrative burden on legal professionals, and frees up their time to focus on more complex and strategic activities.

Zegal, for instance, provides comprehensive solutions that encapsulate this efficiency through its platform, making legal processes more manageable and less time-consuming.

Enhancing transparency

The legal sector has historically been perceived as opaque, relying on complex jargon and processes.

Legal tech, however, is at the forefront of shifting this perception by offering user-friendly solutions that demystify legal processes. Platforms like Zegal play a pivotal role in this transformation, providing tools that promote clarity and understanding, thereby improving the overall quality of legal services.

Certainty and risk mitigation

Digitising legal processes through tech solutions significantly reduces the risk of human error and the loss of critical documents. Automated contract management systems will ensure that every piece of due diligence is accounted for, safeguarding against potential oversights.

Security enhancements

Data breaches are a constant threat, but legal tech offers robust security solutions, such as digital signatures and encrypted data rooms. These technologies secure sensitive legal documents and build trust with clients.

Despite its advantages, the adoption of legal tech is challenging. Initial barriers often include:

Funding constraints

One of the primary obstacles to legal tech adoption is the initial investment required. Legal technologies, especially sophisticated solutions like AI-powered contract analysis tools or comprehensive case management systems, can be expensive.

Strategies for overcoming funding constraints:

  • Cost-benefit analysis: Conduct a thorough cost-benefit analysis to understand the long-term savings and efficiency gains against the upfront costs. Demonstrating a clear ROI can help in securing budget approval.
  • Phased implementation: Consider a phased approach to adopting legal tech, starting with more affordable solutions to demonstrate value before investing in more expensive technologies.
  • Seek external funding: Explore options for external financing, such as grants, legal innovation funds, or partnerships with legal tech providers, which may offer favourable terms for new adopters.

A lack of tech literacy

The successful adoption of legal tech also hinges on the tech literacy of the legal team. A lack of familiarity with new technologies can slow down or even halt integration.

Strategies for enhancing tech literacy:

  • Tailored training programs: Implement comprehensive training programs designed to bring staff up to speed on the new systems. Consider leveraging the training modules provided by tech vendors.
  • Hiring tech-savvy staff: Enrich your team with professionals who can champion legal tech adoption and support their colleagues through the transition.
  • Encourage continuous learning: Foster an organisational culture that values continuous learning and innovation. Provide opportunities for staff to engage with new technologies through workshops, seminars, and conferences.

Resistance to change within organisations

Resistance to change is a natural human instinct, especially in traditional professions such as the legal industry. Concerns over job security, a preference for established ways of working, and scepticism about the effectiveness of new tools can all contribute to resistance.

Strategies for managing resistance to change:

  • Communicate benefits clearly: Ensure that the benefits of legal tech are communicated to all stakeholders. Highlight how it can alleviate burdensome tasks, allowing legal professionals to focus on higher-value work.
  • Involve teams in the selection process: Engage potential users in decision-making. Allowing them to have a say in selecting legal tech tools increases buy-in and reduces resistance.
  • Success stories and pilot programs: Share success stories and case studies from other organisations that have successfully adopted legal tech. Consider running a pilot program to demonstrate the technology’s practical benefits before a full rollout.

Overcoming these obstacles requires comprehensive planning, prioritisation, and the proper support to ensure legal teams can effectively integrate legal tech into their workflows.

Selecting the right tools

The selection process is crucial to overcoming potential resistance to new technologies. Involving employees at all levels in choosing the right tools ensures buy-in and identifies solutions that address the most pressing needs.

Effective implementation

Beyond selection, successful implementation hinges on thorough training and engagement. Custom-built tools and platforms require a deep understanding to be used to their full potential, underscoring the importance of comprehensive onboarding processes.

Ongoing support and evolution

The fast-paced nature of technology means that legal tech solutions require regular updates and feedback to remain effective. Engaging with service providers like Zegal ensures that legal teams have continuous support and access to the latest advancements in legal tech.

Legal templates, from NDA templates to shareholder agreements, are among the most transformative tools available to in-house legal teams. They serve as a foundational element for swiftly creating consistent, compliant, and professionally structured documents.

By starting with a template, legal professionals can significantly reduce the time and effort involved in drafting documents from scratch and ensure that all necessary legal and regulatory provisions are included.

  • Efficiency and time savings: Legal templates streamline document creation, allowing legal teams to produce necessary documents much faster than traditional methods. This efficiency frees up time for legal professionals to focus on more strategic tasks.
  • Consistency and compliance: Templates provide a standardised format that ensures consistency across all documents. Moreover, because templates can be updated to reflect the latest legal requirements, they help maintain compliance with current laws and regulations.
  • Reduced risk of errors: Using a pre-vetted legal template minimises the risk of omitting crucial clauses or incorporating outdated legal language, reducing the likelihood of contractual disputes or compliance issues.
  • Accessibility for non-legal professionals: Legal templates demystify the document creation process for individuals without legal training, making it easier for other departments to draft preliminary documents without immediate legal input.

Customisation and flexibility

While templates offer a solid starting point, customisation is vital to ensuring that each document accurately reflects the specific needs and circumstances of the transaction or matter at hand.

Zegal grants users access to various legal templates and customises them to suit their unique requirements. This flexibility allows for creating legally sound documents that are perfectly tailored to the specific context in which they will be used.

Integrating legal templates into the daily operations of an in-house legal team involves several steps:

  1. Template selection: Begin by identifying the most commonly used documents within your organisation and selecting templates for these documents as your starting point.
  2. Customisation process: Use platforms like Zegal to customise these templates, ensuring they align with your organisation’s legal and operational requirements.
  3. Review and approval: Establish a review process for customised templates to ensure they meet legal standards and receive approval from senior legal team members.
  4. Training and access: Provide training for the legal team and relevant non-legal staff on accessing and using these templates. Ensure everyone understands the importance of sticking to approved templates to maintain consistency and compliance.
  5. Ongoing updates: Review and update the templates regularly to reflect any changes in law, regulation, or company policy, maintaining a cycle of continuous improvement.

The role of Zegal

Platforms like Zegal play a crucial role in this process, providing a repository of legal templates and a comprehensive legal document management environment.

With features that support customisation, collaboration, and electronic signature, Zegal offers a holistic solution for leveraging legal templates effectively within in-house legal teams.

The platform facilitates the drafting and customisation of documents, their execution, and storage, creating a streamlined workflow from start to finish.

Contract automation

Contract automation stands out as a transformative solution for in-house legal teams. This technology harnesses the power of legal tech to simplify and accelerate the contract lifecycle, from initial drafting to final approval and execution.

Integrating contract automation into legal departments’ processes can achieve unparalleled efficiency, accuracy, and operational agility. 

Understanding contract automation

Contract automation involves using software to automate legal contract creation, negotiation, approval, and management. This technology leverages pre-defined templates and rules to generate contracts, streamlines the review and editing process through collaborative tools, and often includes digital signing capabilities to expedite execution.

The ultimate goal of contract automation is to minimise manual tasks, reduce the risk of human error, and shorten contract cycles.

Key benefits of contract automation

  • Increased efficiency: Automating repetitive tasks and utilising templates for standard agreements drastically reduces the time required to produce contracts. This efficiency allows legal teams to focus on more strategic aspects of their roles, such as risk management and compliance.
  • Enhanced accuracy: By standardising contract creation, automation reduces the likelihood of errors and inconsistencies. This ensures all contracts comply with current laws and company policies, mitigating legal risks.
  • Improved collaboration: Contract automation platforms often feature tools that enable real-time editing, commenting, and version control. This fosters better communication between legal teams, stakeholders, and external parties, facilitating smoother negotiations and faster consensus.
  • Streamlined approval processes: Automated workflows can route contracts to the appropriate parties for review and approval, ensuring that no time is wasted and all necessary checks are in place before a contract is executed.
  • Easier contract management and retrieval: Storing contracts in a centralised digital repository makes managing and retrieving documents more accessible. Advanced search capabilities and tagging mean users can quickly find specific contracts or clauses as needed.

Implementing contract automation with Zegal

Zegal is at the forefront of contract automation, offering robust solutions designed to integrate seamlessly with the workflows of in-house legal teams. Here’s how organisations can leverage Zegal for effective contract automation:

  1. Template customisation: Customise legal templates within Zegal for your most frequently used agreements. This ensures that your automated contracts align with legal and business requirements.
  2. Workflow design: Utilise Zegal’s workflow design features to establish automated processes for contract review, approval, and execution. This includes setting up notifications and reminders to keep contracts moving efficiently through the pipeline.
  3. Collaboration and negotiation: Use Zegal’s collaborative tools to negotiate contract terms directly within the platform. This speeds up the negotiation process and maintains a clear audit trail of changes and discussions.
  4. Digital execution: Leverage Zegal’s electronic signature capabilities to enable parties to sign contracts digitally, further reducing turnaround times and facilitating remote transactions.
  5. Contract management: Finally, use Zegal to store and manage completed contracts. The platform’s robust search and management features make it easy to keep track of contractual obligations, renewal dates, and compliance requirements.

The impact of contract automation

The impact of contract automation on in-house legal teams cannot be overstated. Freeing legal professionals from time-consuming administrative tasks allows them to devote more energy to strategic decision-making, risk assessment, and proactive legal counselling. 

Moreover, contract automation’s enhanced speed and agility enable businesses to respond more quickly to market changes, secure deals faster, and maintain a competitive edge.

Speeding up contract execution with bulk e-signing

Bulk e-signing is a groundbreaking feature of modern legal technology, redefining the efficiency and scalability of executing contracts and legal documents.

As businesses grow and the volume of contracts increases, a streamlined, secure, and time-saving document signing becomes paramount. 

The essence of e-signing

Bulk e-signing allows multiple documents to be signed electronically by one or more signatories in a single action. This technology bypasses the traditional, cumbersome process of signing legal documents individually, offering a seamless and expedited path to document execution.

By integrating bulk e-signing into their workflows, legal teams and businesses can significantly accelerate the contract execution phase, ensuring legal agreements are finalised promptly and efficiently.

Advantages of bulk e-signing

  • Enhanced efficiency: Bulk e-signing reduces the time and effort involved in the signing process. Legal teams can send out dozens or even hundreds of documents for signature in the time it would take to manually process just a few, freeing up valuable time for other tasks.
  • Improved accuracy and compliance: By automating the signing process, bulk e-signing minimises the risk of human error, such as missed signatures or misplaced documents. It ensures that every document is signed correctly and complies with legal requirements, reducing the risk of disputes or compliance issues.
  • Scalability: As organisations grow, so does the volume of contracts and legal documents requiring signatures. Bulk e-signing scales effortlessly to meet increasing demands, making it an ideal solution for businesses of all sizes.
  • Cost reduction: Bulk e-signing eliminates the need for physical document handling, including printing, mailing, and storing paper documents. This reduces direct costs and contributes to environmental sustainability by decreasing paper use.
  • Enhanced security: Digital signatures used in bulk e-signing are encrypted, providing higher security than traditional signatures. They also include a tamper-evident seal and an audit trail, ensuring the integrity and authenticity of signed documents.

Implementing bulk e-signing with Zegal

Zegal’s platform offers robust bulk e-signing capabilities designed to integrate seamlessly with the needs of modern businesses and legal teams. Here’s how to leverage Zegal for efficient bulk e-signing:

  1. Document preparation: Start by preparing the documents that require signatures, using Zegal’s template library and customisation tools to ensure they meet your specific needs.
  2. Signatory identification: Identify the parties required to sign each document. Zegal allows for flexible signatory assignments, accommodating various signing scenarios and hierarchies.
  3. Bulk sending: Upload and send multiple documents for signature in a single batch. Zegal’s intuitive interface simplifies this process, guiding users through each step.
  4. Tracking and management: Use Zegal’s tracking features to monitor each document’s status in real-time. Receive notifications as documents are signed and easily follow up on outstanding signatures.
  5. Secure storage: After signing documents, they are automatically stored in Zegal’s secure, cloud-based repository. This facilitates easy access and management of executed contracts.

Bulk e-signing is not just a feature; it’s a strategic tool that propels businesses into the future of digital contract execution. Its adoption signifies a commitment to operational excellence, leveraging technology to streamline processes, enhance compliance, and drive business growth. 

As legal tech advances, bulk e-signing stands out as a critical enabler of efficiency and scalability in the digital age.

The integration of legal tech represents a forward-thinking approach to legal practice, offering unparalleled benefits in efficiency, security, and accessibility.

While the path to full integration may present challenges, the strategic application of resources, careful planning, and support

Platforms like Zegal play a crucial role in this process, providing a repository of legal templates and a comprehensive legal document management environment.

With features that support customisation, collaboration, and electronic signature, Zegal offers a holistic solution for leveraging legal templates effectively within in-house legal teams. 

How to Use Shares to Incentivise Employees at a UK Startup


Allocating shares to a startup team

Early-stage founders and first hires often cite excitement as the key reason for joining a startup

Working for a startup typically means personal sacrifice and losing the security of a higher-paying role with established companies.

The dilemma of the founder or early founding team is how to incentivise additional core founders and build a highly skilled team by sharing this potential growth.

With shares, you must start at the beginning

For a new company with only one shareholder, the simplest way to reward successful new hires is to give them shares. It is a straightforward process and involves minimal paperwork to update the company register and shareholders agreement.

The benefits of your team becoming shareholders in the company are often psychologically important. Shares unite the team as ‘founders’, which helps foster an owner mentality, creating goodwill that fuels the startup vision.

The drawback of this approach is that, while the team is anchored by share ownership, any team members leave to do so with their shares. 

Nothing ties share ownership to their employment contract with the company, and this risk level is naturally inappropriate for every worker.

Protect your shares using forward vesting

To countenance the risk of staff leaving with shares, it is common for early-stage companies to vest shares.

Vest means awarding a specific number of shares to an employee over a specified period.

Example of forward vesting

Rather than awarding 1% of the company’s shares today all in one go, Sarah is asked to work for the company for one year, following which half her shares will be awarded. The other 50% are given over the next two years.

Share vesting has the obvious benefit that if Sarah leaves within a year for any reason (from performance issues to simply not wanting to work at the startup anymore), she does so without any shares. If she leaves after 12 months, she does so with half her shares. 

Awarding shares like this are often referred to as restricted shares. Sarah does not own the 1% outright, and she will need to work for the company for at least three years to own them all.

Companies typically set out the restrictions in a share vesting agreement, which may be quite detailed but typically govern how the employee earns the restricted shares, for example, by hitting certain work-related milestones, time with the company, and seniority. There are also restrictions on what happens to the employee’s shares if they leave the company earlier than planned.

The company ordinarily will want to avoid employees leaving early with shares or, worse, taking them after a bad performance. So, a “good and bad leaver” provision in share vesting agreements is common. These provisions handle situations in which employees are let go for poor performance or resign early, with differing economic outcomes for the employee.

When an employee receives shares, the shares will ordinarily be treated as income and taxed in the UK.

In addition, there is usually a tax event when the shares are actually sold, and the tax paid at that time is capital gains tax (CGT). These taxable events can surprise early-stage entrepreneurs who find that a significant portion of their expected windfall is taxed. This is especially so in startup companies that grow incredibly quickly and increase share value exponentially.

Reverse vesting of shares for tax purposes

After vesting, there is usually a tax event when the shares are actually sold, and the tax paid at that time is capital gains tax (CGT). These taxable events can surprise early-stage entrepreneurs who find that a significant portion of their expected windfall is taxed. This is especially so in startup companies that grow incredibly quickly and the share value increases exponentially.

To address this situation, startups can use reverse-share vesting. Although complex sounding, this can be quite simply understood using the same example as above. 

Example of reverse vesting of shares for tax purposes

Sarah is awarded 1% of the shares in the company, and again, she will receive half after 12 months, with the remainder over the next two years. However, with reverse vesting, Sarah gets the complete 1% of her shares on day one.

The company then has a right to take back her shares (often described as a clawback), which begins with a right to take all the shares back, reduced to a right to take back only 50% of the shares after 12 months, and then to zero after the full vesting period. 

In this way, the same mathematical position is achieved insofar as Sarah receives 1% of shares in the company over three years, only this time, she receives them all at the start. 

Why use reverse vesting?

The idea behind this structure is that the startup’s shares should be at their lowest value in its earliest years. Hence, if an employee receives shares in a drip feed over a more extensive timeframe, the potential for income tax increases dramatically as the value of the shares awarded does each year.

By making the legal transfer on day one at the company, the employee benefits from the award with a low value and could benefit from the lower tax.

Navigating the tax implications of vesting shares

To benefit from reverse vesting, you will need to arrange for your startup and the employees to enter into what’s known as a section 431 election, which is filed with HMRC.

The effect of this election is that no tax is paid by the employee on the date the shares are awarded. It can reduce the tax payable to only capital gains tax (CGT) (at the Entrepreneur Relief level of 10%, payable on the gain in value when the shares are sold). This election must occur within 14 days of the share vesting agreement being signed.

It is worth noting that from a tax perspective, for pre-seed or pre-revenue startups (if not fundraising), giving shares to the team at a nominal value does not create any of the above tax implications since the shares have no value at that time.

What is the difference between shares and share options? 

When you give your employees shares, they immediately become shareholders. They now wear two hats: As an employee and a shareholder with all the rights that come with being a company shareholder, for example, rights to a dividend, voting rights, and the growth in financial value.

A share option (generally referred to as an option) is different and is the right to buy shares in the future. Giving your employees options means they could be shareholders at some future time, but for that to happen, they would need to convert their options into shares.

Converting options into shares is known as ‘exercising’ the option. This mechanism allows an employee to acquire shares at some point in the future by ‘exercising’ the option at a price set at the award date. 

The ability to exercise the option is set out in their option agreement. It is likely contingent on the employee hitting certain employment milestones or the company achieving a landmark event such as significant fundraising, a trade sale, or an IPO. 

Share schemes can be split into those that have received HMRC approval and benefit from favourable tax treatment and unapproved schemes (which, as the name suggests, HMRC has not been notified of). The tax position (which primarily impacts the employee) when they exercise their options varies depending on which scheme is adopted. We will focus on the difference between the tax-advantaged EMI Scheme and unapproved schemes.

Enterprise Management Incentives (EMI Scheme): 

EMIs are tax-advantaged share options. Under the share option plan, employees are allowed to acquire company shares within a specified period and at a fixed price, set up to minimise employee tax. There are strict criteria for setting up an EMI Scheme, but most early-stage startups can satisfy these:

Qualifying companies 

EMI is available to companies with gross assets of £30m or less. In a group, the gross assets test is applied to the group.

The company must carry on a qualifying trade; most tech companies usually qualify. Trades that do not qualify include leasing, farming, financial activities, and property development.

If you have a group setup (with a Holdco), EMI share options must be granted over shares in the parent company (the Holdco), and at least one of your subsidiaries must carry on the qualifying trade.

Your startup must not be under the control of another company. (However, the parent company of a qualifying group can grant EMI options to group employees.)

Qualifying options

Options must be granted to employees or directors over fully paid shares that are not redeemable. The shares can be subject to restrictions.

  • Only EMI options on up to £250,000 worth of shares per employee qualify for EMI.
  • Options can be granted at a discount or nil price, which usually negates the tax advantages.
  • Options must be capable of being exercised within ten years.

Eligible employees

EMI options can only be granted to employees who are required to work at least 25 hours a week, or, if less, at least 75% of their working time must be for the company.

Employees with a ‘material interest’ of more than 30% of the share capital before the options cannot be a part of the scheme.

Tax considerations

The company pays no tax on EMI options. Because options are not considered ‘readily convertible assets’, they will not ordinarily be regarded as earnings for NICs (so no charge to the company or employee).

Look what happens when you ask AI to show you happy employees. Glorious.

Valuing your startup to reduce your team’s potential tax liability

Agreeing on the company’s value with HMRC (the taxman) when the EMI options are granted gives certainty that no income tax charge will arise. 

If the options are granted under an EMI scheme, and the exercise price is at least equal to the market value of the shares when the options are granted, then no income tax will be payable on either the grant of the options or on the exercise of the options.

If the options are granted at an exercise price below the current market value of the shares, there will be no income tax on the grant of the options, but employees will pay income tax on the exercise of the options.

Income tax will be charged on the lower market value of the option shares at the date of grant or the date of exercise, less the total price actually paid for the shares.

Entrepreneurs Relief at the sale of shares

The second key advantage of EMI shares is that if the employee has held the shares for 12 months or more, any capital gain made on the sale will be taxable at 10% (a reduced rate for entrepreneurs) rather than at 28%. 

As with share vesting arrangements, there is a large degree of flexibility regarding the conditions of the option award, including when the employee may exercise the option and acquire the shares, but these must be specified in the option agreement.

They can vest immediately or after a certain period, perhaps after certain performance conditions are met. A common and popular condition is that options only vest immediately before a trade sale, IPO, or major fundraising event.

Example of relief at the sale of shares

Noah is granted 10,000 options at an exercise price of £5 per option. After two years, Noah exercises his options and pays the company £50,000 (10,000*£5). The actual market value of the shares in the company is now £20, so Noah now owns a value of £200,000 shares (10,000*£20). The £150,000 increase is not liable to tax or NICs because the options are granted through an EMI scheme.

If Noah sells his shares now for £200,000, he will pay CGT at the reduced 10% on the capital gain because he qualifies for Entrepreneur Relief.

Unapproved employee share option schemes:

An unapproved option scheme involves granting share options without HMRC approval. It can be used in any situation where the criteria for the EMI scheme cannot be met.

Ordinarily, in the context of a startup, this is likely because either the plan requires much more flexibility than the EMI scheme permits, the number of options is above the EMI threshold, or the individuals being issued options can’t satisfy the criteria for ‘employee’ under that scheme, either because they are not working sufficient hours or are not employees.

So, this scheme can, of course, still be of tremendous value to incentivise consultants, advisors, or individuals outside of UK tax.

Income tax in unapproved share options

Usually, no income tax is due when the option is granted under an unapproved share option scheme. However, there will always be a charge when the options are exercised. Naturally, for UK taxpayers, this is less appealing than using an EMI scheme. 

On the exercise of an unapproved option, the employee will face an income tax charge based on the market value of the shares at the time of exercise, less any amount paid for the options and on exercise (if anything).

In contrast with an approved scheme, the tax charge arises in the year of exercise of an option and not on the subsequent disposal of the shares, meaning the employee may need more funds to pay the income tax liability.  

An employee will usually be subject to capital gains tax at their applicable rate of up to 28% on the disposal of the shares. The amount of the chargeable gain is the difference between the disposal proceeds and the price paid.

Example of unapproved share options

Noah is granted 10,000 options at an exercise price of £5 per option. After two years, Noah exercises his options and pays the company £50,000 (10,000*£5). The actual market value of the shares in the company is now £20, so Noah now owns a value of £200,000 shares (10,000*£20). The £150,000 increase is liable to tax and NICs because the options are granted through an unapproved scheme.

If Noah sells his shares now for £200,000, he will pay CGT on the gain at a rate up to 28%.

The Power of E-Signatures: A Comprehensive Guide to Digital Contracts


A virtual toolkit is no longer a nice but a must for creating efficient business processes. 

From productivity apps to virtual spreadsheets, digital tools help teams and people get more work done — as quickly and conveniently as possible. 

E-signature tools are no different. You can streamline your contract management operations by using an app that helps you request electronic signatures or sign a virtual contract. 

Let’s look at the power of e-signatures and digital contracts. 

In this article, we’ll reveal what both are, including five common examples of digital contracts. We’ll also quickly discuss three best practices for managing virtual contracts. 

Ready to learn more?

Let’s get started.

What are e-signatures?

Electronic signatures (or “e-signatures”) are digital signatures. 

People request e-signatures on electronic documents, such as legal work agreements, to facilitate contract-signing processes. 

Why are e-signatures important? 

E-signatures help streamline the contract and document signing process. 

Sending a physical document via fax or mail and asking for a handwritten signature isn’t just inefficient. It’s also risky. 

Your document could get lost, or an imposter could sign the contract. Even worse, your sensitive data might get compromised or leaked and used by identity thieves.

Conversely, sending a digital document using a vetted electronic process can help you collect signatures efficiently, safely, and legally. 

More on this in a bit.

What are digital contracts? 

Digital contracts are electronic forms people fill out and sign. 

Some teams use electronic signature solutions or contract management software to send virtual contracts to:

  • Stakeholders
  • Clients
  • Employees
  • Students
  • Partners
  • Patients  
  • Contractors 

Other teams may request document creation services from law firms and send contracts via your professional email, fax, and/or by mail. 

Some teams create documents themselves and send them to relevant signees via email. (Hint: This is a risky idea.)

Digital contracts include agreement terms, signature fields, and other relevant details, such as a field for the current date. 

Types of documents teams send are typically in the following categories:

  • Business
  • Education
  • Criminal law 
  • Civil law 

Let’s take a look at some concrete examples.

5 common digital contract examples 

Here are five specific examples of digital contracts people and businesses commonly use:

Divorce mediation agreement

A divorce mediation agreement can keep clients out of the courthouse regarding civil matters, such as divorce requests. It can also help them settle quickly and amicably. Mediation is also often cheaper than court, a plus for budget-conscious families. 

Couples can often start the mediation process digitally if their law firms use electronic document signing software.

However, it’s essential to learn the laws for digital contracts of each state (as they can differ). 

For this reason, you should hire lawyers who are local or from your own state to guarantee their expertise. For example, if you’re going through a divorce and live in Arizona, you should look for “divorce mediators in AZ” to help you. 

After the initial contract signing stages are complete, law representatives can schedule any mandated in-person meetings or additional signatures as needed. This hybrid approach helps families transition as optimally as possible — on the paperwork front.

Non-disclosure agreement

Whether you need to onboard a short-term contractor for a project or hire a new full-time employee, having them sign a non-disclosure agreement (NDA) can help protect your intellectual property.

With an NDA in place, your team is legally obligated to keep your business data and background information private. Failure to do so can lead to legal consequences and penalty fees.

NDAs are some of the most common virtual contracts people sign for:

  • Agencies
  • Project work
  • Contract work 
  • Full-time employers
  • Business partners 

Employment contract

Organizations around the globe need safe and legal ways to create employment agreements. 

When a business needs to hire a part-time, full-time, or seasonal employee, the candidate must sign an employment contract

Businesses with modern tech stacks often facilitate onboarding using virtual tools. These include e-signature apps, team collaboration software, call centre platforms, EdTech platforms, and project management tools

Whether a business operates in-person, remotely, or in a hybrid setting, HR reps can manage employee contract signing entirely online.

Student contract 

Regarding higher education, people don’t often think about students signing “contracts”. 

But when a student applies for a degree program, tuition assistance, or other educational initiatives, they’ll need to firm up their agreements legally if approved. 

Whether they want to earn an associate degree in business or attend medical school, applicants must sign student contracts before qualifying for admittance. 

E-signatures help universities and colleges streamline document signing processes for their students. 

In-person, hybrid, and remote educational organizations use contract management software to help students sign and submit their agreements efficiently. 

Consultancy agreement

Individuals and businesses seek consultancy support when they’re looking to grow or tackle a problem.

For instance, hire a wardrobe consultant to help you choose the best fashion garments for your specific body type and style goals. 

Or, hire a sales consultant to help your business set and achieve higher growth goals. 

E-signature tools help consultants manage the contract-signing process from start to finish. Consultants can also pull up existing agreements to review contract stipulations or fine print as needed.

Best practices for managing digital contracts 

Now that we’ve laid the groundwork for e-signatures and digital contracts, we have a few tips we’d like to share to help you make the most of your contract management processes. 

Here are three best practices we recommend: 

Require multi-factor authentication 

E-signatures and digital contracts are convenient and efficient. 

However they still require some safeguards to ensure validity and integrity. This is especially important when working with a new employee or partner you haven’t officially met.

To validate the signee’s identity, consider requiring multi-factor authentication (MFA), which verifies it using two or more proof factors. MFA might require biometric data, such as fingerprints or facial recognition, or codes sent via SMS or email. 

MFA can reduce the risk of fraud and impersonation and increase confidence and trust in your e-signatures. 

Use contract management software 

Streamline all of your contract management processes with legal-as-a-service (LaaS) software, like Zegal. 

With Zegal, you’ll get access to legally binding electronic contract templates (with e-signature options) that you can edit for your specific use cases. 

Whether you need to send an employment contract or ask a new client to sign a retainer payment schedule, our legal templates and e-signature solution can help you optimize your agreement workflows — from start to finish. 

Here’s what you can expect when you sign up for a Zegal Teams Plan:

  • Create unlimited legal documents
  • Assign, share, and track documents
  • Get access to a dedicated relationship manager
  • Import and export in PDF and DocX formats
  • Collaborate and comment on legal docs
  • Request unlimited e-signatures (on any document)
  • Receive a full audit trail with access history and legal redlining
  • Add your own legal templates
  • Get complete access to all document collaboration features
  • Add as many users as you need
  • Access 24/7 live chat support

This plan is perfect for small to medium enterprises. Join Zegal for free today and get your first doc on the house.

But there’s one more thing we’d like to recommend…

Create use-case checklists

Create a checklist for each contract use case so you never forget which agreements you need to get signatures for.

Start by listing your use cases.

For instance:

  • Onboarding
  • Termination 
  • Promotions 

Then, create a checklist for each one.

For example:

Onboarding

  • Send employment contract
  • Send NDA
  • Send the scope of work agreement 
  • Schedule training and mentorship 
  • Schedule employee’s official first-day
  • Schedule an HR meeting to choose a benefit package 

Termination 

  • Send termination contract
  • Send offboarding checklist 
  • Provide final schedule 
  • Schedule their last day 
  • Offboard the user from our internal tech stack 

Promotions

  • Send new employment contract with updated roles and responsibilities 
  • Send the new scope of work agreement 
  • Send an updated NDA
  • Schedule training and mentorship 
  • Schedule the employee’s official first day in their new role
  • Provide user access to new tools needed for the employee’s new role 

Build these checklists into your operational workflows so you never skip an important step or contract requirement.

Wrap up 

E-signatures and digital contracts have revolutionised the way people and businesses sign and submit legal agreements. 

In our modern tech world, you can skip the fax machines, traditional wet signatures, and slow printers in favor of quick, digitalized systems. 

Use e-signatures and digital contracts to fulfill virtually any agreement. 

This includes contracts for educational, personal, business, civil, or criminal law use cases.  

If you’re ready to make your contract management processes as easy as possible, you need a tool like Zegal. We offer plans for individuals, small to medium enterprise teams, and law firms. 

Sign up for your free trial today. ☑️

Here’s to your success!

Author Bio:

Ioana Wilkinson

Ioana specializes in Business, Digital Marketing, and SaaS content for B2B brands. Born in Transylvania and raised in Texas, Ioana has been living the digital nomad life since 2016. From Barcelona to Puerto Vallarta to her new abode in windy Oklahoma City, you’ll never know where Ioana will head off next.

What is a Board Meeting? An Essential Guide for Businesses


At its core, a board meeting is a strategic symposium convened by the board of directors, the group of executives tasked with the collective oversight of an organisation.

Board meetings are a cornerstone of corporate governance, offering a formalised setting for deliberation, accountability, strategic planning, risk management, shareholder engagement, compliance, and effective communication.

Board meetings ensure the company is moving in the right direction and adhering to its legal and ethical obligations.

Types of board meetings

A board meeting may come in various forms, each designed to address specific aspects of a company’s governance and operation:

Regular Board Meetings

These are held at predetermined intervals (e.g., monthly or quarterly) to review ongoing activities, financial performance, and strategic issues.

Special (or Extraordinary) Board Meetings

Called to address urgent matters that require immediate attention outside the regular meeting schedule. Topics might include mergers, acquisitions, or crisis management.

Annual General Meetings (AGMs)

Legally required meetings where shareholders are presented with the company’s financial statements, elect directors, and decide on other significant matters.

Special Meetings of Shareholders

Focused on specific issues affecting shareholders, such as changes in corporate structure or significant corporate actions.

Shareholders’ Resolution in Lieu of an AGM

A resolution passed by shareholders that negates the need for a physical AGM, streamlining the decision-making process.

Shareholders’ Resolution to Remove the Need for an AGM

This allows a company to dispense with the requirement to hold an AGM, offering flexibility in how shareholder approvals are obtained.

Preparing for a board meeting

Effective board meetings begin with thorough preparation, which involves sending out a detailed agenda and any relevant documents well in advance, ensuring that all participants are informed and ready to contribute to the discussions.

The architecture of a board meeting can vary widely, influenced by the organisation’s stage of development. While startups and tech companies may adopt a more flexible approach, larger entities often adhere to rigid protocols to ensure orderliness and systematic operation. Nevertheless, the fundamental elements of board meetings are broadly consistent across different organisational types.

The key to a successful board meeting is to follow the set agenda, facilitate productive discussions, and accurately record decisions and action items in the minutes for future reference.

Conducting a board meeting

Preparation for a board meeting involves the distribution of a comprehensive document detailing each director’s report on pertinent issues and their insights on various subjects.

As the meeting commences, the CEO will provide a synopsis of goal attainment and address any emerging concerns. Directors might also contribute presentations on their respective domains or stand by for inquiries if their reports are comprehensive.

Subsequent discussions may revolve around topics flagged by board members or reflections on progress toward organisational objectives. The board chair is crucial in facilitating these discussions, encouraging feedback on the presentations, and initiating actions on identified issues.

There may also be instances where the board opts for private discussions without the CEO or other leaders to evaluate their performance impartially.

Additionally, procedural tasks, such as validating stock option grants, might be undertaken before concluding the meeting.

Plan your board meeting with Zegal templates

Board meetings are vital for a company’s strategic governance and operational oversight. They ensure informed decision-making and compliance with legal requirements.

To streamline the process of organising and conducting board meetings, Zegal offers a suite of legal templates, including notices for board meetings, AGMs, special meetings, and resolutions that can significantly ease the administrative burden.

By leveraging these resources, businesses can ensure their board meetings are compliant, more efficient, and productive, contributing to the overall success and governance of the company.

Pros and Cons of Franchising Your Business


If your business has reached a stage of comfortable stability, it’s natural to start pondering over strategies for growth and diversification.

Among the various strategies, a franchise agreement stands out as a noteworthy option. This model involves a partnership where you, the original business owner or franchisor, sell the rights to operate the business in specific locations or target markets to third parties, known as franchisees.

While embarking on a franchising journey introduces a range of risks, it also paves the way for expansion into new territories and markets, making it a tempting prospect for any ambitious business.

To help you navigate this decision, let’s delve into both the benefits and potential risks of franchising, offering a comprehensive overview to inform your strategic planning:

Pros of franchising

Facilitating Business Expansion through Capital Access

A common barrier small to medium-sized businesses encounter is securing sufficient capital for expansion.

Franchising emerges as an innovative solution to this dilemma, allowing businesses to grow without heavily investing their own capital.

In this model, the franchisee is responsible for the capital investment needed to open and operate the new outlet, thus assuming the associated risks of debt and equity. This setup enables you, the franchisor, to expand your business footprint with minimal financial input, focusing your resources on enhancing the franchise system itself.

Broadening Your Brand’s Horizon

The power of franchising is evident in the global recognition of leading franchises such as 7-Eleven, McDonald’s, and Dunkin’ Donuts, which have become synonymous with their respective industries.

As a business owner, your brand is your most valuable asset. Expanding into unfamiliar markets, however, can present challenges, particularly when it comes to understanding local consumer preferences and achieving optimal market penetration.

This is where the local insight and expertise of your franchisee become invaluable. By empowering franchisees to adapt and manage the business in line with local tastes and standards, franchising allows you to extend your brand’s reach and build robust brand awareness in markets previously untapped or not prioritized for direct development.

Harnessing Motivated Talent

The quest for dedicated and competent management is a hurdle frequently encountered by entrepreneurs. Traditional employment contracts often fail to foster a deep sense of commitment, leaving businesses vulnerable to turnover and competitive poaching.

Franchising offers a compelling alternative by transforming the franchisee into a manager and an owner. This dual role cultivates a profound sense of investment and loyalty towards the business, ensuring that franchisees are motivated to achieve long-term success.

The result is an elevation in operational standards, as franchisees strive to uphold the integrity of their investment, and a surge in innovation, driven by their stake in the business’s prosperity.

Cons of franchising

The Double-Edged Sword of Brand Expansion

The very mechanism that facilitates rapid brand expansion through franchising can also pose one of its most significant risks: the potential for brand dilution. Granting franchisees the autonomy to represent and market their brand inherently involves risk.

Should a franchisee’s marketing strategies or brand representation deviate from your established brand identity, it can confuse consumers and weaken the overall brand image.

It’s imperative, therefore, to implement stringent guidelines for using brand assets and maintain a system wherein all branding initiatives receive your approval beforehand.

Navigating Limited Control over Operations

Unlike company-owned operations, where you maintain direct oversight, franchising introduces a level of detachment from day-to-day management.

As independent business owners, franchisees enjoy a significant degree of autonomy, which can sometimes lead to disparities in operational standards and customer service experiences.

Furthermore, a franchise network’s dispersed nature can slow the implementation of new products, services, or marketing campaigns, especially if these initiatives do not align with the franchisees’ profit objectives.

This dynamic underscores the importance of fostering a collaborative relationship with franchisees, ensuring that both parties’ interests are aligned towards mutual success.

Mitigating conflicts in a franchise agreement

Inherent in the franchising model is a potential for tension between franchisors and franchisees, particularly when decisions disproportionately benefit one party.

Establishing a comprehensive franchise agreement is critical in this context. Such an agreement delineates the rights and responsibilities of both parties, covering essential aspects like training, operational support, and the appropriate use of intellectual property rights.

For businesses contemplating franchising as a growth strategy, understanding and preparing for the benefits and risks involved is vital to fostering an environment where the franchisor and franchisee can thrive.

What Is a Reserved Matters List, and What Is It For?


A Reserved Matters List is a crucial component within corporate governance, particularly in the context of shareholder agreements or corporate charters.

It delineates specific decisions or actions that can only be undertaken by obtaining prior approval from a designated authority within the company, typically either the board of directors or shareholders. The required approval is usually beyond the ordinary approval under general corporate law.

The primary purpose of a Reserved Matters List is to safeguard the interests of minority shareholders by ensuring that significant decisions, which could significantly affect the company’s direction, structure, or financial health, are not made unilaterally by the majority or by the company’s management without broader consent.

This mechanism is designed to bring balance and fairness to the decision-making process, particularly in areas where the outcomes could disproportionately impact specific groups of shareholders.

What are reserved matters in a shareholder’s agreement?

Reserved matters typically include actions such as amendments to the company’s constitution or bylaws, changes to the capital structure, decisions on mergers and acquisitions, substantial asset sales, and changes in the dividend policy, among others.

By requiring special approval for these critical decisions, the Reserved Matters List is a protective measure for all stakeholders, promoting transparency and accountability in the company’s governance practices.

Examples of reserved matters include:

  • Amending the company’s constitution.
  • Altering the company’s capital structure.
  • Issuing dividends or making other distributions.
  • Modifying the rights attached to shares.
  • Initiating winding up or restructuring procedures.
  • Managing the company’s intellectual property.
  • Buying or selling shares or engaging in collaborations or joint ventures.
  • Introducing significant changes to business operations.
  • Altering the employment terms of key executives.
  • Meeting obligations towards third parties, such as borrowing money or providing guarantees.
  • Engaging in transactions involving directors or shareholders.

Shareholder reserved matters

Before classifying a matter at the shareholder level, consider the relevance of directors’ duties and the potential for delays in decision-making due to difficulty tracking shareholders.

Approval of reserved matters is more commonplace at the shareholder’s level, with common issues already discussed above.

 These may encompass:

  • Starting litigation proceedings or claims.
  • Making gifts or charitable donations.
  • Amending or approving the budget or business plan.
  • Modifying the appointment of auditors, accounting policies, or practices.

Some matters are broader versions of the every day reserved matters, such as:

  • Undertaking activities “outside the ordinary course of business.”
  • Entering into unusual, onerous, significant, or long-term contracts.

Notably, some matters could be more timely, such as those concerning initial coin offerings. Users of model shareholders’ agreements must carefully assess whether the list suits their needs.

What are board Reserved Matters?

The board decides reserved matters at this level to facilitate company management.

This enables certain decisions to be vetoed by the director representing minority shareholders. Even after such provisions are drafted, the director must balance his general duties while wielding the power granted by the reserved matters, acting in good faith for the company’s success.

Common board-level reserved matters include:

  • Employment and alterations to employment terms.
  • Granting security interests over company assets.
  • Incurring financial indebtedness.
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What are some common limitations of reserved matters?

Limitations or qualifications to reserved matters typically result from negotiations reflecting:

  • The degree of control or influence desired by minority and majority shareholders for their investments.
  • Ensuring reserved matters are not exploited for unintended purposes.
  • Preventing undue delays in the company’s decision-making process.
  • Setting financial thresholds for when shareholder approval is needed, for example, incurring debt beyond a certain limit.
  • Employing terms like ‘material’ or ‘substantial’ to indicate that only significant contracts or changes require reserved matter approval.
  • Exempting matters approved in a business plan or budget from further approval as a reserved matter.

Reserved matters meaning

The Reserved Matters List in a shareholders’ agreement requires careful and thoughtful drafting.

An inadequately prepared list can disrupt the company’s daily operations, lead to insufficient control or influence for minority investors, or, in the worst cases, be misused, providing unintended veto power.