Issue link: https://htpgraphics.uberflip.com/i/116729
Company Structure Section 3 Liability Another important concept for you to remember is that the liability of a shareholder is limited to the amount, if any, unpaid on his or her shares. In other words, if the company incurs a large liability or is sued by a creditor because it cannot pay a debt, the shareholders should, if they have fully paid for their shares, be immune from any such action unless, for example, they have agreed personally to guarantee any such liability of the company. Directors can also be personally liable for actions of the company (for example if they allow the company to run up debts with no hope of ever paying its creditors). If you will be taking on the role of director, you may want to consider directors' and officers' insurance at an early stage (see Section 8 – Insurance). Documentation So what are the key documents and concerns that are likely to be relevant when setting up the spin-out company? n A Business Plan – this brings together the strategy and operational plans of the business proposition: it conveys the business opportunity. It should be concise. Whilst the plan details are likely to change frequently from inputs of others and from experience as the business itself develops, it is very important to be clear about the fundamental business model and the routes to market (ie who are the customers and how will they be approached?). All of the directors as a group (ie the board) must take responsibility for ensuring that the plan is a strategic document which is credible and robust. n Heads of Terms (also styled a "Term Sheet") – these capture the headline points of agreement on the deal/arrangements, which will be developed in detail later into formal legal documents, such as a Shareholders' Agreement. They are put together to check everyone's understanding and act as a record of the deal discussions, soon after an agreement in principle is reached. They should be specifically written so as not to be legally binding, except perhaps in respect of confidentiality. n IP Assignment/Licence – will the company own or have the right to use IP or other assets or equipment in order to conduct its business? If so, the terms of such agreements will need to be documented. Shares can be issued for such assets. 17