How can digital signatures improve and speed up your equity management processes
Some things just need to work
As the single source of truth when it comes to equity management, online cap tables have to ensure that startups’ data is always available and accurate. These characteristics prove to be invaluable in every single fundraising event, due diligence, exit, etc. To ensure the accurate and always available information, digital signatures are a necessary addition.
1. Why is Ledgy adding digital signatures?
Through conversations with fellow founders, a common theme emerged: When going through processes such as signing dozens of news stock option plans every month or getting funding documents signed by all shareholders, delays and administrative hassle were always a problem.
A particular example that inspired us to try to improve one of the delay-prone processes was a 30 day waiting period to receive a single signature. This wasn’t because of laziness but purely because of the waiting times. The postman had to hand-deliver the handwritten signature to the stakeholder and then back to the startup.
In this particular example, the whole due diligence process and term sheet negotiations were delayed. The cap table was ready and attached to the contracts, the financial projections were calculated and yet everyone had to wait for the final signature of a 30-minute board meeting from a year ago.
Delays are not really a problem of organization, but rather outdated and inefficient processes
At first glance, the signatures are just a small part of the startup workflow, but it has happened far too often that a single missing signature delayed important milestones.
Every startup needs to have all the required signatures. The best-case scenario is to have them all of the time and if that’s not possible, they have to be there when the legal institutions check-in.
If Ledgy as an equity management solution really wants to help startups become more successful, we had to start thinking about the whole ecosystem. We recognized that signatures are a key component and built our workflows that take them into account.
As seen from the example above the bottleneck is the process of retrieving and storing signed documents. Ledgy is now here to help.
2. How can you digitally sign documents on Ledgy?
Although there are existing platforms for signing documents digitally, we found it’s crucial to have the signed documents linked to equity transactions.
This way, documents are stored exactly where they were relevant and are thus easier to find and track. This is particularly crucial when going through due diligence and makes it way easier and less expensive for startups.
3. Employee grants: The process of collecting signatures and storing documents are now much faster and better organized
The addition of digital signatures significantly shortens the process of granting employee incentives. With Ledgy equity plan automation workflows follow similar steps as they happen in person, but faster and with additional features.
You have the ability to request and receive signatures in seconds, track progress and attach signed documents to relevant employee incentive transactions.
The workflow in action:
- Every grant represents a separate transaction.
- You can then attach a related document to each of the transactions.
- You can request a signature for the document from all relevant stakeholders. This document can be signed from anywhere in the world, without printing out and scanning the copy.
- Once the signing is complete, Ledgy automatically replaces the unsigned document with the signed one.
- The signed document is safely stored and easy to find in Ledgy’s data room.
After you import the grants and documents, Ledgy takes care of the rest:
- It calculates the vesting schedules and the impact the grants have on the cap table.
- Most importantly, Ledgy will notify you of the upcoming vested grants and expiry dates as well as missing and completed signatures.
Note: Digital signatures are available to all Premium and Enterprise plan customers.
4. The validity of digital signatures in the European Union and can they replace handwritten signatures?
Ever since eIDAS was implemented, the member states are required to recognize electronic signatures that meet the eIDAS standards. There are three digital signature levels:
- Standard Electronic Signature (SES): Ensures the integrity of the document by embedding a certificate that proves the time of signing and that it hasn’t been changed since. It can be used for documents without formal requirements. Because it doesn’t need a strong verification of the signer’s identity, it is very fast and frictionless.
- Advanced Electronic Signature (AES): Provides unique identifying information that links the embedded certificate to its signatory, e.g. by verifying a passport image once. It provides higher legal security and is therefore ideal for more important contracts.
- Qualified Electronic Signature (QES): Provides the same legal validity as a handwritten signature, i.e. can be used for anything. It needs a strong authentication of the signatory, e.g. by a short video identification call during which the passport and person are verified.
A collaboration with the Bundesdruckerei allowed Ledgy to become a certified signing provider for SES. Who better to trust with online legally valid signatures than the backbone of identity cards and passports, the Federal Printer or “Bundesdruckerei” in German. The Bundesdruckerei has been manufacturing and providing legal documents for the last 250 years. In the coming months, Ledgy will, together with Skribble, roll out the AES and QES EU-wide as well.
Digital signatures for employee grants, work contracts, board meetings, etc.–which signature level is required?
The majority of HR and financial corporate transactions do not require a specific electronic signature under EU law. For example in Germany VSOP grants do not have a formal requirement and therefore can be signed digitally to be legally valid. A Standard Electronic Signature (SES) is sufficient.
The rest of the legal requirements for document signing are described in the help article.
5. We created help articles explaining digital signatures and you can read all of them here
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