March 25, 2023

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SAS, CA … the structure of Next40 start-ups deciphered

It’s not just funding in the life of a start-up. At the beginning – but also afterwards – entrepreneurs have to delve into an unattractive subject: legal matters. Which statutes to opt for? What types of shares to issue? Which clauses are essential? The law firm Jeantet has published a study on the structures of Next40 members.

First observation, 80% of them have opted for a simplified joint stock company (SAS). “Those that have chosen the status of public limited company are the oldest start-ups. The SAS model has clearly imposed itself in recent years”, notes Stephen Walters, partner at Jeantet, specifying that this status is more flexible and subject to fewer restrictions.

A majority of preferred shares

A type of action has also imposed itself in French Tech. Nearly 87% of Next40 members have issued preference shares, that is to say securities with specific rights, such as a right of redemption or priority redemption.

Nearly half (46%) of these start-ups opted for contractual preference shares (defined in the shareholders’ agreement), and the other half, statutory (defined in the articles of association). The former are less costly when issued and allow confidentiality to be maintained on the financial details (share price, valuation, etc.). The latter have equivalences abroad and are therefore preferred by investors who are not French.

The study also reveals that 33 members of the Next40 have “ratchet” clauses, a mechanism that allows investors to protect themselves against a drop in the value of a start-up.

The inevitable board of directors

Another important subject for growing start-ups: governance. All Next40 members have a collegial body which often takes the form of a board of directors (CA). “It’s quite surprising, because it is not compulsory in the SAS”, points out Stephen Walters. Some start-ups set up monitoring committees or strategic committees, which have the same powers as a board.

Also note: more than half of Next40 members have between seven and ten members in their supervisory body. A range that corresponds to the recommendations of the collective of tech entrepreneurs The Galion Project, which has just published its “Board Guide”. “In the beginning, a start-up can set up an extremely light board. When it brings in two or more investors, you have to be more formal and set up a board culture. So when other investors come in, it will be easier to manage,” advises Jean-Baptiste Rudelleco-founder of Le Galion.

The collective returns to the importance of properly composing its board of directors (gender, age, experience, etc.), how to organize it and the main mistakes to avoid. “We must avoid an asymmetry between investors who are used to being on boards and founders who are in their first box, underlines Jean-Baptiste Rudelle. The entrepreneur must be able to set limits and must not have decisions imposed on him, in particular operational decisions. »

A relationship to take care of, especially during turbulent times like those that tech has been undergoing for the past few months.