Warrants, options and convertible loans, in plain words.

In short

None of these are shares. A share register lists shares and who holds them. A warrant, an option or a convertible loan is a right to get shares later, so it is not in the register, and the law does not ask for it there. The register gets a new line on the day the right is used and shares are handed out.

aktiebok.io keeps warrants and options beside the register, so that the cap table can answer the question every investor asks: who would own what if all of it were used. That view is called fully diluted.

In aktiebok.io: six things to do

A programme is entered once, with its terms. After that you only move its warrants or options. Four of the six things to do are under Add entry, in the group Warrants & options; the two done less often are under More entry types.

Each of them is an entry in a draft: you review it, in words and in figures, and nothing is registered until you confirm. Each stays in the History under the same name.

What the cap table then shows is in The cap table and dilution, and what is filed with Bolagsverket in Filing with Bolagsverket.

Teckningsoptioner

In plain words. The company promises that the holder may subscribe for new shares later, at a price set today. If the company has grown, that price is a bargain and the holder uses the right. If not, the holder lets it run out.

In real life, and in aktiebok.io

Personaloptioner, and the kvalificerade kind

In plain words. The company promises an employee, in an agreement, the right to get shares later at a set price, usually on the condition that they stay for some years. The employee pays nothing for the promise.

Kvalificerade personaloptioner (KPO, in English QESO) are the same thing arranged to meet the conditions of a tax rule for young, small companies, which removes the tax on the benefit when the options are used. Whether a programme meets those conditions is a question for the company's adviser and Skatteverket; a register cannot tell. In aktiebok.io both are entered as Employee options.

In real life, and in aktiebok.io

Vesting (earning the options over time) is in the option agreement, with its rules for someone who leaves. aktiebok.io does not calculate it. When the agreement says options are lost, you take them back.

Employee options are personal. The Transfer warrants form lists programmes of warrants only. When options pass from one employee to the next, take them back and give them out again.

Convertible loans

In plain words. Someone lends the company money, with the idea that the loan becomes shares instead of being repaid, usually at the next funding round and often at a discount to the round's price.

Two things go by this name.

• A konvertibel in the law's sense is issued by a decision of the general meeting and filed with Bolagsverket within six months, like warrants. The lender has a right to swap the claim for shares on the terms decided.
• A loan agreement with a promise to convert is an ordinary loan. Nothing is registered. At the next round the general meeting decides on a new issue to the lender, paid by setting off the loan against the price (a kvittningsemission).

Neither is entered as a programme. How many shares a loan becomes is often not known until the round it converts in, and a loan is not in a share register.

In real life, and in aktiebok.io

Questions that come up

Are options and warrants in the share register?

No. The printed register lists shares only. They show in the cap table's fully diluted columns and in their own list under it, Warrants and options, where you open a programme to see its holders.

Who can see them?

Everyone who can read the company's register sees the programmes and who holds what.

What does "fully diluted" count?

Every share, plus every share that warrants and options still running would give, including what is unallocated in a programme. Convertible loans are not counted, since they are not entered.

What is the Unallocated row?

The warrants or options of a programme that no holder has yet. It is not a shareholder: it has no shares, no votes and no value, and it belongs to no group. It is there so that the fully diluted total is the whole programme.

When do the new shares count?

In the register from the day the board allots them. In the share capital from the day Bolagsverket registers them.

We promised options but have not issued any warrants.

Enter the programme the same way. How the shares will be delivered does not change what you enter.

Someone left. Take back or cancel?

Take back when the warrants or options still exist and can go to someone else: they return to Unallocated and still count fully diluted. Say they were cancelled when the board has cancelled them: they leave the programme for good.

A holder used warrants in the last days, and we enter it afterwards.

Enter the Exercise dated on the day the shares were allotted. After the last day you can still enter it, as long as it is dated on or before that day.

We split the shares, or made a bonus issue.

Enter the split or the bonus issue and nothing else. Every programme that exists on its date is recalculated, as terms normally say: the number of warrants or options stays, each gives proportionally more or fewer shares, and the price per share changes the other way. The review says what happens to each programme before you confirm, and the programme's own page shows its terms before the change. Do not cancel a programme and enter it again for this.

We entered a programme wrong.

Reverse it from History and enter it again, like any entry. Entries that moved its warrants or options are reversed first.