As my first blog posting I wrote about decision making in the context of founding Epic Owl. As my second blog posting I wrote about getting public funding for the company. The events depicted in my fourth blog posting (this one right here) take place somewhere in between those two events. Indeed, this is again in the series of a newbie CEO finding out how the world operates.
Now, the decision has been made to start the company and applying for the public funding looms somewhere in the very distant future. What should one do? Answer: Seek help.
In Finland, there are several instances you can contact for support when you’ve decided to found a company. Me and Risto went to meet EnterpriseEspoo where we bounced around our business plan and got confirmation on many things we already suspected. Pretty much everything can be found on the web anyways but it always makes it easier if you can talk to someone who has the core expertise readily at hand.
After the meeting and a brief training seminar arranged by EnterpriseEspoo, I knew all the theory there was to know. Next step, registering the company.
Registering the company
My non-competition clause from my former employer ended on 28th December, 2014 so naturally 29th December, 2014 is the day Epic Owl came into existence. In Finland, you can found a company by following this five-step plan:
- Register the company in PRH (Finnish Patent and Registration Office) using YritysTietoJärjestelmä (www.ytj.fi) with the minutes of the founders’ meeting, corporate by-laws and electronic signatures of each founder (29th Dec, 2014)
- Establish a bank account for the company (2nd Jan, 2015)
- Pay the initial stock capital (min 2.500€) to the bank account and get a stamped confirmation about it from the bank (2nd Jan, 2015)
- Finalise the registration of the company in YritysTietoJärjestelmä (2nd Jan, 2015)
- Get the approved papers from PRH (14th Jan, 2015)
With careful planning and taking into account the New Year, we had everything finalised by 2nd January, 2015. Now we officially had the company, we had a great plan and strategy to execute, now we needed the means for it.
Already in November 2014 there were a couple of insider people who knew we were entertaining the idea of founding a company. Naturally, with the talent such as the Epic Owl core team, it wasn’t a big secret for long and we were contacted by some very interested seed investors. We started negotiations with one that seemed to suit us the best and actually turned out to be a very solid seed investor for new gaming companies with the greatest of people involved. With our strategy and our game idea, they were pretty easily convinced we are the team to invest to. In addition, three of us founders put some money in and we got the rest from the FFF sector (Family, Friends, Fools).
So, now we had the company and at least on paper, we also had the money. The money itself we wanted to put to the reserve of invested non-restricted equity (sijoitetun vapaan oman pääoman rahasto) instead of the stock capital of the company. But how to actually get it to our bank account? Answer: Issue new shares.
Issuing new shares
In the pages of PRH you can find information on how to organise and register your new shares. The pages describe a two-phase process but we learned it makes more sense to handle both phases simultaneously, at the end of the process. We actually lost several weeks in bureaucracy and ended up scrapping our original registration and starting from scratch with the both-phases-at-once process.
Step 1: Shareholders’ Meeting about issuing new shares
The first thing to do when issuing new shares is to have a shareholders’ meeting and decide upon it. With PRH it is recommended that the new shares are registered (i.e. the process is finished) within one month of the date of the meeting.
Remember to write down as many details as possible into the minutes to prevent complications with PRH. Some key things we needed to have in the minutes were:
- The participants along with the share numbers they represent
- What is the immediate economy-based need for issuing new stock
- The amount of money to be raised with the new shares
- The number of shares to be issued along with their price
- The names of the investors purchasing the new shares
Important Note: Do not write down the final four digits of people’s social security numbers in the minutes, PRH won’t accept it as an attachment if you do.
Step 2: Better Call Saul, i.e. Lawyer Up
After fiddling with the share issuing and PRH for a while, it was suggested by our investors that we might want to get a lawyer to handle the bureaucracy involved. It obviously costs a lot but it might prevent some considerable losses and hassle later on.
Not wanting to miss the learning opportunity, we set up a hybrid process where we did as much as we could ourselves and hired a lawyer to point out caveats, offer insight and proof-read the documents. This worked well. Still cost a lot, though, but not as much as it could have.
Step 3: Shareholder Agreement
The most critical and time-consuming phase and the most important document involved, the Shareholder Agreement. It’s a good idea to start iterating this with the new shareholders as early as possible. We ended up using a template from here:http://www.seriesseed.fi/
, with quite many changes, pointed out by ourselves, our lawyer and our investors. After about 10 iterations, we got a version that suited everybody and could proceed.
Step 4: Stock markup lists, Cap Table and paying up
After getting the Shareholder Agreement done it’s all downhill from there. Next up, you need to write a document called markup list, where you state the price of your shares, the number of shares to-be-purchased by each shareholder and your bank account details.
The shareholders then sign the lists and pay the shares to your bank account.
You also need to update your Cap Table and company shareholder lists, here are a couple of examples:
Step 5: Final registration
Now it’s finally time to register your new shares to PRH with their proper form (Y4). If you marked the new shares into the reserve of invested non-restricted equity, remember that the stock capital increase is 0€. Here are the attachments we managed to pull this through with:
- Minutes of the Shareholders’ Meeting
- Board members’ and CEO’s signed confirmations that the share issuing was done according to the relevant legislation
- Receipts of the payments made by the investors
- Receipt of the registration payment for PRH
Thanks for reading, I hope you enjoyed this!