Transfer Agents – What are They and Do You Need One?

When planning for the financial success of your business, there are many things to consider. Sometimes, smaller details can be lost in the long list of other priorities. However, these details can be very important – and can cause major problems if you do not understand your options.

One of these finer details is keeping tabs on shareholders. As your company grows, you will take on more and more investors who have an interest in both your profits and performance. When there are only a few of these shareholders, keeping track of them is not difficult. But what happens when your business grows, and that list gets too long to manage on a simple spreadsheet?

Enter the Transfer Agent

For companies with growing shareholder lists and many related tasks to handle, it can be beneficial to hire a dedicated transfer agent. These professionals handle duties that keep tabs on your investors, both current and potential. Some of these duties include:

  • Collecting and organizing detailed lists of shareholders’ information
  • Maintaining ownership records
  • Managing distribution to shareholders
  • Issuance and cancellation of stock certificates
  • Conversion and exchange of securities, and more

With all this to handle, it stands to reason that many larger companies trust the task of shareholder management to a dedicated agent. But does your company need one?

Does Your Company Need a Transfer Agent?

Smaller businesses may not need a dedicated transfer agent – especially as they take on their first few shareholders. This short list means that existing staff can handle the duties mentioned above. However, handing the process off to an agent can be a weight off the shoulders of the company’s management and legal team once the list of shareholders begins to grow – and can free up the rest of the team to focus on issues that are more relevant to everyday operations.

Consider your current number of shareholders and your hopes of securing investors in the next funding round. If that list is longer than a few names, it might be time to consider partnering with a pro to keep tabs on your cap table!