Sharing the down low on Shares. 👀

Hey there,

Welcome back to our monthly newsletter focused on helping your business grow faster and smarter. We’re:

1. 🙋‍♀️ Answering the one legal question we’ve been asked most this past month by founders and startups. 

2. 📰 Summarizing a noteworthy piece of news (and why it’s relevant to you). 

3. ✅ Giving you one legal reminder to check off your list. 

4. 🚀 Sharing several events this month that could bring value to you and your business.

5. 💸 Linking a few funding opportunities we love.

Got a question you’d like us to answer next month? Just reply to this email and let us know.

1. Our Most Asked Question during August:
How can I understand the value of my shares?
(and what is share capital value vs. market value?!) 📊

In a nutshell, a share represents a portion of your company. 💼

Each share usually provides voting rights, a percentage of profits and capital rights. 

Now, there are a few types of shares. The most common type is called ordinary shares. These typically provide equal rights to all shareholders. 

Other types of shares, such as preference shares or non-voting shares, can be issued to meet specific business needs.

Note that while shares can be issued without voting rights (i.e. non-voting shares) a company must always have some shares issued that carry the right to vote. 

Ok, but what about the difference between my company share value and share market value? Great question! 🙋‍♂️

Share capital is the amount of money you bought your business shares for; this determines your share capital value. No one will question you on this because it’s what you paid for the shares at the beginning. 

The share market value is the current price at which a share of your company can be bought or sold in the stock market, which reflects the perceived value of your company and current investor sentiment. This is the value that you negotiate with your investors. 🤝

So if you set up the company with one million shares with a £1 value each, the share capital is £1 million (and you would need to pay £1 million into your company bank account to own those shares - not a good idea).

But just because you set up the company to have one million shares at £1 each, doesn’t mean an investor would agree - perhaps they think your company is only worth £0.70 a share and so will only buy a share for £0.70.

This is a reflection of how the market values your company. 

The market value of your company isn’t determined by you, but instead by how much someone is willing to pay for a share of your company. 💷

2. Noteworthy News:
Is private equity exiting the UK? 🚫

The new Labour government is planning on closing a tax loophole that allows private equity fund managers to pay a lower capital tax rate; 28% of profits instead of 45%. 🥹

Considering that private equity managers often invest their own money into new funds and receive a lower salary until the funds become profitable, increasing the tax to 45% will significantly alter the risk-reward dynamics for private equity managers. 📉

Now, the Labour government anticipates that they’ll be able to generate around £565 million from this tax reform, which they plan to invest in mental health initiatives.

But will such a drastic tax increase stop new talent from entering the private equity sector and prompt existing managers to move to countries with more favourable tax environments, like Spain, Italy, Switzerland, and Portugal?

3. Your September Legal Reminder:
Have you checked whether your business will be compliant with the incoming AI regulations? 🤖
(Hint: even if you’re a UK company, these may still apply to you.)

The EU AI Act, the first comprehensive AI law in the EU, will be enforced starting August 2, 2026. Now we know this seems far off, but these regulations are significant and will require time to implement.

The EU AI Act takes a risk-based approach, categorising AI systems into several categories:

🚫 Prohibited AI Systems:  Certain AI practices, like using subliminal techniques or manipulative or deceptive techniques, are banned.

🚩High-Risk AI Systems: AI systems used in specific sectors like healthcare, law enforcement, and education must meet strict requirements for data quality, transparency, and human oversight.

✅ Limited and Minimal Risk Systems (think chatbots): Even if your AI system isn't high-risk, it may still be subject to the Act's transparency and ethical requirements.

Non-compliance can result in fines up to €35 million or 7 percent of worldwide annual turnover, so it's crucial to understand which category you fall into as you develop and deploy AI solutions within your business.

4. Upcoming Entrepreneurial Events 🤓

September 12th-13th: IdeasFest – entrepreneurship conference & business event designed to help you learn from the invaluable insights of business leaders, make connections, and validate your ideas.

September 24th: Airwallex x Startup Grind Private Dinner with VCs – an exclusive dinner for late-stage tech founders to meet and network with VCs while participating in discussions around global expansion and growth.

September 25th: Meet the Startup Funders – hear from a variety of early-stage investors on what they look for in a business and learn how to access their capital.

September 26th: Startup Summit: AI + Fundraising – a half-day virtual event packed with insights and strategies to help early-stage startups navigate the era of AI.

September 30th: Notion CxO Day 2024 – meet and network with fellow C-suite leaders in a relaxed setting.

5. Funding Opportunities

💰‘I’ve got an Idea Fund’: a micro fund for either individuals or small groups or organisations who have a technologically innovative idea that they want to test out.

💰Female Founders Competition by Fiverr: Fiverr and Virgin StartUp are once again challenging female founders across the UK to show us how business-building is done for their chance to win £15,000 to spend on Fiverr.

That’s all folks, see you next time.

– The SuLe Team 

P.S. If you have questions about whether something in this email applies to your business, we’re just a free 15 min consultation away. ;)