It will cost the directors of a company up to $10,000 each for failing to maintain an accurate share registry according to the Companies Act. You can also tag on about as much to have lawyers trawl through multiple years of excel sheets, disorganised company documents, transactions, and legal agreements as they to piece together where things went wrong in your companies ownership structure.
So why is it the case that so many New Zealand companies are still choosing to manage the interests of their shareholders in an excel spreadsheet instead of spending a fraction of the reparation costs to outsource their registry tasks? In our experience at Snowball Effect, we have found that companies who choose to manage the share registry themselves are often unaware of the administrative tasks and ongoing maintenance they set themselves up for in the future.
When onboarding new shareholders to your cap table, it is important to remember that the records you keep now will be the reference point for years to come. Think of it as a car service: You might not like spending money on servicing the car now but you would rather do it than spending 10 times the amount repairing the engine down the road. The same principle applies to your company’s share registry. If the documents, transactions and agreements that you maintain now are incomplete, incorrect or poorly managed, the problems will compound when you have to reconcile the information in a few years time.
An example of this is an investor's pre-emptive rights which give a shareholder the right to maintain his or her percentage ownership of a company by buying a proportionate number of shares in any future share issues. If just one of the company’s shareholders has a miscalculated shareholding, it has the potential to affect the calculated pre-emptive rights of every other shareholder in the company by altering the total shares outstanding. The knock-on effects from errors such as these will wreak havoc in a cap table and will continue to grow the longer problems go unaddressed.
Spending the money on outsourcing your registry now to a reliable third party can save you thousands in lawyers fees and a number of headaches down the road. This ensures that all past, present and future information will be stored securely, with a robust and transparent history of movements within a company.
If you are still undecided about outsourcing the registry entirely, a good starting point is using Snowball Effect’s Share Registry Template to build an accurate cap table from scratch.
The companies that Snowball Effect typically works with can have upwards of 1,000 shareholders, where it is imperative that share transactions, share issues, and associated legal documents are stored securely and available at any time upon request. We have seen the increased difficulty that companies face when choosing to manage their relationships with shareholders through excel and offline documents.
Issues such as misplaced documents and buried emails can lead to a frustrated shareholder base when having to piece together the information they have already communicated to you or expected to be actioned. Companies often start out trying to manage the share registry themselves, only to realise in a years time that they are collecting information from multiple sources when they would have saved significant time having all of the data in one centralised location.
We have developed a robust online platform to deal with these issues. Companies using Snowball Effect’s registry have access to an administrative dashboard, which acts as a ‘one-stop shop’ for gathering any information they might need, while the support team picks up the administrative work of facilitating share transfers, sales and other corporate actions. On the other side of the fence, investors have a login portal where they are able to view their shareholdings, request share transfers from our team, update personal information and download their statement of holding.
Having a dedicated platform which centralises company functions, coupled with a support team to perform registry tasks, companies are able to present a professional image to investors while making sure their requirements as shareholders are met. At the end of the day, investors feel looked after and valued as the company manages the relationship efficiently, while the company saves time by not having to dig through emails and folders to locate information.
Due to United States securities law, many citizens and residents of the United States are not able to access, or participate in, any offer through Snowball Effect.