Share Council blog

The Terms of Administration: How to Draft Them?

Written by Quintus Willemse | Feb 1, 2024 4:00:00 PM

You have established a STAK to issue share certificates to your employees. As a result, the STAK holds the legal ownership, and your employees have acquired the economic ownership. It is then, of course, no rocket science to understand that agreements must be made between the STAK and your employees. These rules are outlined in the terms of administration. But how do you draft these conditions? You will find the answers in this article!

What are the terms of administration?

First and foremost, it is essential to have a good understanding of what terms of administration entail. These conditions simply refer to the agreement between you and your certificate holders regarding the rights and obligations concerning the (certificates on) shares.

Who drafts the terms of administration?

Next, it is crucial to determine who is authorized to draft the terms of administration. This is often the notary, who establishes the conditions directly when founding the STAK. However, this is not mandatory. You may also draft or modify the terms of administration yourself. Be aware that these agreements must be legally correct and clear if you choose this route. Additionally, always ensure that the conditions are documented in writing, as an oral agreement becomes challenging to prove later on!

What is included in the terms of administration?

The terms of administration are not explicitly regulated by law. Therefore, you are free to decide their content. However, certain agreements remain important:

  • Offering of certificates: how the certificates are presented.
  • Transfer of economic ownership: the obligation for the STAK to distribute dividends to certificate holders and the manner and timing of such distributions.
  • Administration: who maintains the register of certificate holders?
  • Costs: who bears the expenses of administration.
  • Transparency: how the STAK ensures transparency in the administration.
  • Encumbrance of certificates: often, the terms of administration include rules regarding the encumbrance of certificates, ensuring that this only occurs with the STAK's consent.

Difference between terms of administration and articles of association

Lastly, it's important to note that you should not confuse the terms of administration with the articles of association. The terms of administration pertain to the rights and obligations involved in certifying shares, while the articles of association concern the internal affairs of the STAK, such as governance and objectives.

Conclusion

The terms of administration remain a complex legal document. Despite having the option to draft them yourself, we recommend seeking assistance from someone with a legal background to ensure accuracy. Share Council can assist you in this regard. Schedule a non-binding call with our CEO to discuss the possibilities or pose your questions during our webinar.'