Before the first purchase: the paperwork that can say no

Shareholder agreements, loan covenants and bank terms can limit what a company holds. Read them first.

Welcome to issue 2 of the IoT Financial newsletter: one treasury lesson a week for small companies in the UK and the US that hold, or are thinking about holding, bitcoin.

This week is about the work that comes before any bitcoin is bought: reading the documents that may already decide whether the company can hold it, who has to agree, and who has to be told.

This week's lesson: before the first purchase

Most early mistakes here are not about wallets. They are about agreements the company signed years ago and nobody reread. A shareholder may have a veto. A loan may only allow certain kinds of investment. A bank may have rules about where business payments can go. Finding this out after a purchase means unwinding it, or asking forgiveness from someone whose consent you needed.

Here are three sets of documents to read, and what to look for in each.

1. The company's own rules, and any shareholder or operating agreement. In the UK that means the articles of association and any shareholders' agreement. In the US it means the certificate or articles of incorporation and the bylaws for a corporation, or the operating agreement for an LLC. Look for:

• any limit on what the company may invest in, or on using cash outside the ordinary course of business
• "reserved matters" or "major decisions" that need the consent of shareholders, members or an investor director
• spending thresholds above which the board, or the shareholders, must approve
• investor rights such as a veto, a right to be consulted, or regular reporting that would now need to include the holding

2. Loan agreements and other finance documents. Read the definitions as well as the covenants, because the restriction is often hidden in a defined term. Look for:

• a definition of "permitted investments" or a list of assets the company may hold
• covenants that restrict buying assets, or that require a minimum cash balance, which a purchase could breach
• a charge or security over the company's assets, which may reach a new asset, and whether the lender expects to know where it is held
• use of proceeds clauses, which may say borrowed money can only be spent on stated purposes
• notice duties, and what counts as an event of default if a covenant is broken

3. Bank account terms and the bank relationship. Check the business account terms and any guidance from your bank on payments to cryptoasset platforms. Your bank may ask about the purpose of a large or unusual transfer, so it helps to know in advance what the bank will want to see. A later issue covers the bank relationship in more depth.

What to do with what you find. Make a one-page list: the document, the clause, what it says, who must agree or be told, and the status. Where consent is needed, get it in writing before the purchase, not a verbal "that should be fine". File each consent with the board minutes and the treasury policy. If a clause is unclear, ask your solicitor or attorney what it means for your company. And note anything that would change the answer later, such as a refinancing or a new investor, so the list is rechecked when that happens.

US update: the digital asset question on business returns

We checked the IRS digital assets page and the current Instructions for Form 1120 (the 2025 edition) on 28 October 2026. The digital asset question is Question 27 on Schedule K of Form 1120, and the IRS page says a version of the same question also appears on Form 1120-S and Form 1065. The "What's New" section of the 2025 instructions does not list a change to it.

Three points from those pages are worth knowing before a first purchase:

• The 2025 instructions say that holding a digital asset, transferring it between wallets or accounts the corporation owns or controls, or buying it with US dollars or other real currency, generally do not, alone, require a "Yes". The question must not be left unanswered.
• The IRS digital assets page adds that a transfer between your own wallets does count as a digital asset transaction if a transaction fee was paid with digital assets. So the network fee on a move into a multisig wallet can matter here, not just in the books.
• The same page carries a scam alert about letters with a QR code asking people to register cryptocurrency on a "Digital Assets Compliance Portal". The IRS says it does not require registration of digital assets and is not sending these letters.

Check with your adviser how the question applies to your company's return.

• IRS: Digital assets
• IRS: Instructions for Form 1120 (2025), Schedule K, Question 27

Worked example (US, illustrative)

Example LLC is an invented company and all figures and clause wording are examples.

Example LLC has an example $250,000 term loan from its bank. The members have discussed holding a small amount of bitcoin from cash above the company's protected reserve. Before anything is bought, the manager rereads the loan agreement and finds that the company may only make "Permitted Investments", defined as bank deposits, money market funds and US Treasury bills. Bitcoin is not on the list, and breaking the covenant would be an event of default.

The manager:

1. Writes to the lender describing the plan: a cap on the holding (an example $15,000 at cost), the custody model under discussion, and that the money would come only from cash above the protected reserve.
2. Asks for written consent, or an amendment adding the holding to the list of permitted investments, and asks what reporting the lender would want, for example a quarterly statement of the holding.
3. Checks the operating agreement, which in this example treats any investment over $10,000 as a major decision needing approval from members holding a majority of interests, and gets that approval in writing.
4. Files the lender's consent letter and the members' approval with the treasury policy, and adds a note to recheck both if the loan is refinanced.
5. Makes no purchase until both are in hand. If the lender had said no, that answer would be recorded and the plan would wait.

The point is that the conversation with the lender happens before the purchase, not when the next compliance certificate is due.

Use this

Question 2 of our custody questionnaire asks whether an auditor, lender, investor agreement or the board requires a regulated third party to hold the asset. Answer it after this review, not before, because the documents above are where that requirement would be written. The policy guide's adoption steps also say to set the first review date before any purchase is made:

• Custody guide: the questionnaire
• Policy guide: adopting the policy

If there is a topic you would like covered, email hello@iotfinancial.net.