Ensure that you are all set legally
By setting up a virtual share plan, your company is making a legal commitment. We recommend engaging your in-house lawyers or external legal advisors to handle these matters and also invite you to review the KOOS Issuer Guide for our legal, taxation and accounting manual to obtain a more detailed overview of the legal and tax matters involved.
To avoid surprises in the future for you and for your virtual shareholders, we have brought out actions you need to take before launching your plan.
1. Make sure that you are eligible issuer
Since virtual shareholding is not harmonized globally or even across Europe, you can currently issue virtual shares in the following countries: United Kingdom, Finland, Estonia, Lithuania and Latvia. For more details, see Eligible Country definition in the Issuer Guide manual.
2. Make sure that your virtual shareholders are eligible
Eligible virtual shareholders are from within European Union countries. For more details, see Eligible virtual shareholder definition in the Issuer Guide manual.
3. Get to know the restrictions that apply to virtual shares
As of now, koos.io does not allow for virtual share plans where virtual shares are transferable and tradable. This means that the issued virtual share is redeemable only by the original recipient, cannot be transferred to another person and cannot be traded. For more details on the limitations, see the Legal Limitations definition in the Issuer Guide manual.
4. Get your shareholders on board
Since your company is making a commitment to the virtual shareholders when a certain future event occurs, it is correct for the shareholders to also acknowledge that commitment and confirm the fulfillment of the commitment in the contract between the virtual shareholder and the company. So, your first step is to find out whether there is some kind of obligation in the shareholders' agreement that requires the shareholders' resolution or not. And if there is no such obligation, we recommend that the shareholders sign such a resolution. To make things easier for you, we have compiled:
- a sample of text to the shareholders on how to introduce your collaboration with koos.io;
- an example of a liquidation waterfall to illustrate how existing shareholders are compensated when a company is liquidated;
- an example of shareholders resolution for shareholders to sign.
5. Update privacy policy settings
In order to provide issuer services and enable issuers to reserve and issue virtual shares to contributors, both the issuer and KOOS need to process certain personal data about those individuals. This means that you most probably need to amend your Privacy Policy as well to include that aspect. In our Privacy and GDPR guide, we explain the main obligations related to data processing that apply to the Issuer and KOOS based on the GDPR.
6. Be aware of tax and accounting issues
Depending on the nature of the activities rewarded by virtual shares, the issuance or realization of virtual shares may be subject to taxation, including payroll taxes. For more details, see taxation and accounting guidance in the Issuer Guide manual.
7. Accept the terms of virtual shares
After all the work described above is done and you know that you are legally authorized to execute the plan, you need one more important item - the agreement between your company and the virtual shareholders (Terms of Virtual Shares).
Terms of Virtual Shares is based on a template provided by koos.io in which you specify the characteristics of the virtual shares to be issued. This document will be attached to each virtual share upon issuance and will specify the rights of a virtual shareholder (and the corresponding obligations of the virtual share issuer) as well as the conditions that the virtual shareholder must meet in order to benefit from the rights.
