Are electronic securities valid and what do I need to do with my paper certificates?
Depending on where your company is domiciled, you may need to maintain your paper certificates along with your digital stock certificates. The best way to know is to check with your legal advisor. At Sprout, we can recommend some great lawyers so just ask us.
There are two ways to represent stock on Sprout: “certificated” and “uncertificated”. These just refer to how a company chooses to evidence ownership of stock. “Certificated” shares are represented with a certificate (paper and/or electronic), and “uncertificated” shares are simply entries recorded on an official ledger (like debits and credits to a bank account or an accounting ledger). Certificated shares are shares evidenced with a paper stock certificate (traditionally this is just a piece of paper with important details about the shares). Whoever holds the “certificate” has physical evidence of ownership.
Uncertificated shares are shares tracked on the books of the company. These shares are issued without a certificate to evidence ownership. Uncertificated shares might also be thought of as “book-entry” shares. The company, the company’s transfer agent, or a broker-dealer provides evidence of ownership to the owner via an account statement and regular updates.
We are already using Carta (or a similar service), why should we switch?
We are inspired by many of the services that came before us, but Sprout was born of the feedback we received from many founders and executives.
Too much: Carta is designed for lawyers and tax accountants and is too complex to use and unnecessary as many end up hiring their own legal or accounting services.
Too American: American providers go very deep and follow US GAAP standards and comply with the IRS and SEC regulations. Not everyone needs a system that is “all-in” with the US system.
Too expensive: Another feedback is that Carta is becoming expensive and is leaving behind the startup community for larger, later stage enterprises. Moreover, many startups have to additionally pay/hire a lawyer to manage it, creating a costly situation.
Why Sprout is better: We believe we built a better product, especially internationally. Sprout is built on the premise that companies will continue to rely on subject matter experts (ie, accountants, lawyers, companies secretaries) and focuses on “common denominator” needs. We also designed Sprout to include corporate secretaries who have to hold companies’ paper stock certificates and stripped out the excess. We are basically at feature parity with many providers but our platform was designed with ease and practicality of use. Finally, Sprout offers a generous freemium tier and competitively priced for SMEs and enterprises.
Do I need a law firm or a company secretary to help me?
Sprout is designed for anyone authorized to onboard and manage your company’s stakeholder information so you do not need a lawyer to provide your stakeholder information, but as we recommend you consult both a legal advisor and a company secretary to ensure your company remains compliant in your home jurisdiction. Sprout can recommend some great partners should you require. Just ask us!
How are your security measures?
We take the following measures to make sure your data is safe and secure:
- Your data will be stored securely on AWS in Singapore.
- SSL certificate and encryption
- 256-bit AES file encryption
- We offer 2 factor authentication for you and your users too.
- Real-time access notification and access log
We are also attaining the following certifications:
- ISO / IEC 27001:2013 is the International Standard for Information Security Management Systems (ISMS) and is recognised globally for managing risks to the security of information we hold. Certification to ISO 27001 also achieves compliance with regulations such as the European Union General Data Protection Regulation (EU GDPR).
- SOC 2 (System and Organizational Control 2) is based on the AICPA’s (American Institute of Certified Public Accountants) TSC (Trust Services Criteria) and focuses on system-level controls of the organization and deals with the protection and privacy of data.
Does Sprout support special purpose vehicles (SPV)?
We are uniquely designed to support SPVs for stock option holders or investor groups. You can create the SPV as one shareholder with one account and, because we can track holding companies and subsidiaries, we can also create a related entity to track individual shareholders of the SPV. We have practical use cases and can share common practices – just ask us how!
Does Sprout support phantom options / stock appreciation rights?
Yes! Sprout was developed to handle all the flavors of the stock option rainbow. As entrepreneurs ourselves we have been around the block a few times and have planned and implemented phantom options in different tax jurisdictions. If phantom options are not the right solution for you, speak to us and we can discuss other types of long term incentive awards for your employees and stakeholders.
How does Sprout track Holding Companies and their subsidiaries?
We know international companies can be complicated with related entities so we developed Sprout to uniquely handle this. As a Super Admin, you can set your company account up to see your holding company and related businesses and all the shareholders. Schedule a demo with us and we will show you how.
Should I transition from Excel to Sprout now or wait till after we are done fundraising?
We recommend onboarding your data as soon as possible for a few reasons. Firstly, using Sprout can signal to investors you are organized and on top of your fundraising game. Moreover, fundraising can be prolonged with no end in sight — having your data all on Sprout earlier also helps your existing stakeholders manage their own information, so they do not come back with questions while you are closing your round. Finally, with Sprout scenario modelling tools and your data onboarded, you and your existing investors are able to run dilution and exit models to see the impact of the upcoming investment.
What do I need for onboarding?
Not much. Getting your data on Sprout should not be hard and we are designed to go fast and make it as painless as possible. Onboard onto Sprout with your spreadsheet, screenshots or from Carta and we will handle the rest.
Onboard in days, not months!
I need help with everything, including managing my entire ESOP. Can you help?
Yes, we get it. You might have hundreds or thousands of employees and shareholders — and there are limits to what you and your team can handle. Sprout’s Enterprise Services allows companies to completely outsource cap table and ESOP management services to us at a cost effective and immense time savings at scale. Sprout will provide you with a dedicated account management team to manage everything and work with all your shareholders, freeing you and your team to get back to work.
Ask us how it works and for a customized fee quotation.