The deed poll, tokens and investor rights

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What an equity-backed token is, what the deed poll is, and what rights token holders have.

What an equity-backed token is

An equity-backed token is a transfer-restricted financial instrument issued by the company's cell in Spring SPC. The cell is a ring-fenced part of a Cayman Islands segregated portfolio company (SPC) that holds the company's shares.

Holding an equity-backed token does not make the holder a shareholder of the operating company.
The cell itself is a shareholder of the operating company.
The token holder's rights come from the deed poll.

What a deed poll is

A deed poll is a legal document signed by one party that creates binding obligations towards others, who can enforce it even though they did not sign it. Here, the cell company signs a deed poll in favour of the holders of that company's tokens.

The deed poll sets out:

• what token holders are entitled to receive;

• when payouts happen and how they are made;

• the rules for transferring tokens;

• how token holders can enforce their rights.

The economic claim

Each equity-backed token gives its holder an economic claim: the right to receive an equal, fixed fraction of the net proceeds the cell receives from the company's shares. For example, a holder of 1% of a company's tokens is entitled to 1% of the cell's net proceeds from that company's shares.

The claim applies to a fraction of what the cell holds, not to a fixed percentage of the company.

When token holders receive proceeds

Token holders are entitled to receive their share of proceeds when a liquidity event occurs, meaning an event that turns the cell's shares into cash or other value, such as:

• a sale of the company;

• a public listing (IPO) of the company;

• a dividend paid by the company.

The deed poll sets out how each type of event is handled. For example, in a cash sale, holders claim their share in stablecoin. In a share-for-share sale, the claim carries over to what the cell receives from the buyer.

Before a payout, Spring runs sanctions screening and checks that the holder's verification is still valid. Holders do not need to go through the full verification process again unless their details have changed or expired.

Token holders' rights

In addition to the economic claim, the deed poll and the agreements the cell signs with the company give token holders the following protections:

• Sale protections. If founders sell their shares, the cell can sell alongside them on the same terms (a "tag-along" right). The company's intellectual property cannot be transferred out without the cell's consent, and any side payments to founders connected with a sale count as part of the sale price.

• Information. Token holders receive monthly updates from the company and an annual report showing the cell's percentage ownership of the company.

• Enforcement. Token holders can enforce the deed poll against the cell. Holders of at least 10% of a company's tokens can require the cell to enforce the company's obligations, and take action in the cell's name if it does not.

• Governance over escrowed funds. Investors in a round can vote on how that round's escrowed funds are released.

• Dispute resolution. Disputes under the investment agreement are resolved through individual arbitration rather than in court. Claims from different holders relating to the same distribution can be combined into a single proceeding.

What equity-backed tokens do not include

• No governance rights over the company. Token holders have no say in how the company is run. Investors in a round have a separate, limited vote over that round's escrowed funds.

• No public market. Equity-backed tokens are not listed on any exchange.

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