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Mark Phillips, Harbottle "Legal and other perspectives on financing" thursday@3 26/4/12
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Lawyers for the business of media and entertainment Legal and other perspectives on financing
Mark Phillips
26 April 2012
Funding Cycle
work for hire
overdraft
traditional publisher developer
bespoke deals
tax credits
grants project
structured financing
crowd funding
equity investment
public funding (IPO)
boot strap
Basic Housekeeping
Protect your Intellectual Property
Protecting your IP
Does the Company engage freelancers or consultants
Is any IP createdowned by the Company
If not need an assignment of IPR
Protect Your Confidential Information
Are you sending confidential information to potential investors
If so need a non-disclosure agreement (ldquoNDArdquo)
Ensure important contracts are documented and available
Be Careful About Sending Business Plans
Are you sending out your memorandum or business plan to members of
the public
There are various rules and regulations to protect the publicinvestors
Take care not to make misleading statements
Tax Credits (1) (RampD)
Benefit
SME = 225 of qualifying costs ndash reduce corporation tax or receive a
credit
RampD project seeks to achieve an advance in overall knowledge or
capability in field of science or technology through the resolution of
scientific or technological uncertainty
Not simply an advance in its own state of knowledge and capability
Qualifying costs
Spend on eligible projects on certain categories of expense
Eg
staff costs directly engaged in RampD
software
sub-contractor costs (SME only)
raw materials
Take advice
Tax Credits (2) (new games tax credit)
Consultation and not effective until 2013
Treasury figures games tax fund will be pound15m ndash Y1 and pound35m ndash
Y2
For TV and Animation also
Film tax credit is the model
additional deductionreduce corporation tax
core expenditure
greater support for lower budget
completion date
per projectnot per company (unlike RampD and French tax credits)
cultural test
25 or gtpound20m or 20 ltpound20m
Tax Credits (2) cont
Definition of a GameGames
what element of production
DLC extensions = new product
post launch (eg socialmobile games) activity
MMOS
Cultural Test ndash which body
Practical pointers
cash flowing tax creditsinterim claims
not all production expenditure
Tax Incentives for Shares
Enterprise Investment
Scheme (EIS)
30 income tax relief of cost
up to 300k pa
No CGT
Loss relief (net of initial tax
relief)
CGT deferral relief
(investment year before of
three years after)
Seed Investment Enterprise
Scheme (SEIS)
50 up to pound100k pa
No CGT
20122013 disposals ndash CGT
exemption if proceeds are
re-invested
Tax Incentives for Shares cont
Enterprise Investment
Scheme (EIS)
Qualifying Company
small ndash assets less than 7m
pre money 8m post and less
than 30 employees
up to pound5m from EIS or VCT
no of conditions
Investor
not employees partner or
paid director
owncontrol 30
Seed Investment Enterprise
Scheme (SEIS)
assets not pound200k and pre
money and less than 25
employees and new
business
up to pound150k from SEIS
no of conditions
non executive
owncontrol 30
Business Plan or ProspectusRegulation
Basic Rules
any financial promotion needs to be issued or approved by
authorised person (Financial Services and Markets Act 2000
(ldquoFSMArdquo)
If for more than pound5million and to more than 100 recipients need a
prospectus complying with Prospectus rules and FSMA
Exceptions for non prospectus
Qualified investors or
Self-certified sophisticated investors and high-net worth
individuals
NB rules on promotions apply to collective investment schemes
ndash (eg crowd funding)
Growth Investment
Investor
Angelssuper angels or VC
Process
LOI
Due Diligence
Documentation (entrepreneurs flexibility v protection of
investment)
Growth Investment cont
Documentation
Subscription and Shareholdersrsquo Agreement
New Articles of Association
Disclosure Letter
LoanFinance Documentation
Option Documentation
New Service Agreements
IP Assignments
OR
Share certificate
Subscription and Shareholders Agreement
Function is To set out terms between parties
Deal with future situationsexit routes
Deal with existing business
Key = to protect the minoritynon-management shareholders
Key Concerns for Investors Warranties ndash To flush out information about the business
DirectorObserver Rights ndash To have a degree of management input and control
Investor Consents ndash To give Investors knowledge of and veto over key matters
Management and Information Rights - To give investors key financial information about company
Restrictive Covenants ndash To prevent key executives from competing and poaching staff and customers
Option pool
Articles of Association
Key Concerns for Investors
Pre-emption rights on new issues of shares and transfers of shares
ndash to avoid being diluted
Restrictions on share transfers ndash the investors are investing in the
entrepreneurs themselves
Drag and Tag Along Rights ndash to stop the minority jeopardising a
deal and to enable them to benefit from exit
GoodBad Leaver provisions ndash to discourage key employees from
leaving
Others (eg dividend preference liquidation preference ldquodown
roundrdquo protection)
Any questions
Mark Phillips
Partner
020 7667 5000
markphillipsharbottlecom
Funding Cycle
work for hire
overdraft
traditional publisher developer
bespoke deals
tax credits
grants project
structured financing
crowd funding
equity investment
public funding (IPO)
boot strap
Basic Housekeeping
Protect your Intellectual Property
Protecting your IP
Does the Company engage freelancers or consultants
Is any IP createdowned by the Company
If not need an assignment of IPR
Protect Your Confidential Information
Are you sending confidential information to potential investors
If so need a non-disclosure agreement (ldquoNDArdquo)
Ensure important contracts are documented and available
Be Careful About Sending Business Plans
Are you sending out your memorandum or business plan to members of
the public
There are various rules and regulations to protect the publicinvestors
Take care not to make misleading statements
Tax Credits (1) (RampD)
Benefit
SME = 225 of qualifying costs ndash reduce corporation tax or receive a
credit
RampD project seeks to achieve an advance in overall knowledge or
capability in field of science or technology through the resolution of
scientific or technological uncertainty
Not simply an advance in its own state of knowledge and capability
Qualifying costs
Spend on eligible projects on certain categories of expense
Eg
staff costs directly engaged in RampD
software
sub-contractor costs (SME only)
raw materials
Take advice
Tax Credits (2) (new games tax credit)
Consultation and not effective until 2013
Treasury figures games tax fund will be pound15m ndash Y1 and pound35m ndash
Y2
For TV and Animation also
Film tax credit is the model
additional deductionreduce corporation tax
core expenditure
greater support for lower budget
completion date
per projectnot per company (unlike RampD and French tax credits)
cultural test
25 or gtpound20m or 20 ltpound20m
Tax Credits (2) cont
Definition of a GameGames
what element of production
DLC extensions = new product
post launch (eg socialmobile games) activity
MMOS
Cultural Test ndash which body
Practical pointers
cash flowing tax creditsinterim claims
not all production expenditure
Tax Incentives for Shares
Enterprise Investment
Scheme (EIS)
30 income tax relief of cost
up to 300k pa
No CGT
Loss relief (net of initial tax
relief)
CGT deferral relief
(investment year before of
three years after)
Seed Investment Enterprise
Scheme (SEIS)
50 up to pound100k pa
No CGT
20122013 disposals ndash CGT
exemption if proceeds are
re-invested
Tax Incentives for Shares cont
Enterprise Investment
Scheme (EIS)
Qualifying Company
small ndash assets less than 7m
pre money 8m post and less
than 30 employees
up to pound5m from EIS or VCT
no of conditions
Investor
not employees partner or
paid director
owncontrol 30
Seed Investment Enterprise
Scheme (SEIS)
assets not pound200k and pre
money and less than 25
employees and new
business
up to pound150k from SEIS
no of conditions
non executive
owncontrol 30
Business Plan or ProspectusRegulation
Basic Rules
any financial promotion needs to be issued or approved by
authorised person (Financial Services and Markets Act 2000
(ldquoFSMArdquo)
If for more than pound5million and to more than 100 recipients need a
prospectus complying with Prospectus rules and FSMA
Exceptions for non prospectus
Qualified investors or
Self-certified sophisticated investors and high-net worth
individuals
NB rules on promotions apply to collective investment schemes
ndash (eg crowd funding)
Growth Investment
Investor
Angelssuper angels or VC
Process
LOI
Due Diligence
Documentation (entrepreneurs flexibility v protection of
investment)
Growth Investment cont
Documentation
Subscription and Shareholdersrsquo Agreement
New Articles of Association
Disclosure Letter
LoanFinance Documentation
Option Documentation
New Service Agreements
IP Assignments
OR
Share certificate
Subscription and Shareholders Agreement
Function is To set out terms between parties
Deal with future situationsexit routes
Deal with existing business
Key = to protect the minoritynon-management shareholders
Key Concerns for Investors Warranties ndash To flush out information about the business
DirectorObserver Rights ndash To have a degree of management input and control
Investor Consents ndash To give Investors knowledge of and veto over key matters
Management and Information Rights - To give investors key financial information about company
Restrictive Covenants ndash To prevent key executives from competing and poaching staff and customers
Option pool
Articles of Association
Key Concerns for Investors
Pre-emption rights on new issues of shares and transfers of shares
ndash to avoid being diluted
Restrictions on share transfers ndash the investors are investing in the
entrepreneurs themselves
Drag and Tag Along Rights ndash to stop the minority jeopardising a
deal and to enable them to benefit from exit
GoodBad Leaver provisions ndash to discourage key employees from
leaving
Others (eg dividend preference liquidation preference ldquodown
roundrdquo protection)
Any questions
Mark Phillips
Partner
020 7667 5000
markphillipsharbottlecom
Basic Housekeeping
Protect your Intellectual Property
Protecting your IP
Does the Company engage freelancers or consultants
Is any IP createdowned by the Company
If not need an assignment of IPR
Protect Your Confidential Information
Are you sending confidential information to potential investors
If so need a non-disclosure agreement (ldquoNDArdquo)
Ensure important contracts are documented and available
Be Careful About Sending Business Plans
Are you sending out your memorandum or business plan to members of
the public
There are various rules and regulations to protect the publicinvestors
Take care not to make misleading statements
Tax Credits (1) (RampD)
Benefit
SME = 225 of qualifying costs ndash reduce corporation tax or receive a
credit
RampD project seeks to achieve an advance in overall knowledge or
capability in field of science or technology through the resolution of
scientific or technological uncertainty
Not simply an advance in its own state of knowledge and capability
Qualifying costs
Spend on eligible projects on certain categories of expense
Eg
staff costs directly engaged in RampD
software
sub-contractor costs (SME only)
raw materials
Take advice
Tax Credits (2) (new games tax credit)
Consultation and not effective until 2013
Treasury figures games tax fund will be pound15m ndash Y1 and pound35m ndash
Y2
For TV and Animation also
Film tax credit is the model
additional deductionreduce corporation tax
core expenditure
greater support for lower budget
completion date
per projectnot per company (unlike RampD and French tax credits)
cultural test
25 or gtpound20m or 20 ltpound20m
Tax Credits (2) cont
Definition of a GameGames
what element of production
DLC extensions = new product
post launch (eg socialmobile games) activity
MMOS
Cultural Test ndash which body
Practical pointers
cash flowing tax creditsinterim claims
not all production expenditure
Tax Incentives for Shares
Enterprise Investment
Scheme (EIS)
30 income tax relief of cost
up to 300k pa
No CGT
Loss relief (net of initial tax
relief)
CGT deferral relief
(investment year before of
three years after)
Seed Investment Enterprise
Scheme (SEIS)
50 up to pound100k pa
No CGT
20122013 disposals ndash CGT
exemption if proceeds are
re-invested
Tax Incentives for Shares cont
Enterprise Investment
Scheme (EIS)
Qualifying Company
small ndash assets less than 7m
pre money 8m post and less
than 30 employees
up to pound5m from EIS or VCT
no of conditions
Investor
not employees partner or
paid director
owncontrol 30
Seed Investment Enterprise
Scheme (SEIS)
assets not pound200k and pre
money and less than 25
employees and new
business
up to pound150k from SEIS
no of conditions
non executive
owncontrol 30
Business Plan or ProspectusRegulation
Basic Rules
any financial promotion needs to be issued or approved by
authorised person (Financial Services and Markets Act 2000
(ldquoFSMArdquo)
If for more than pound5million and to more than 100 recipients need a
prospectus complying with Prospectus rules and FSMA
Exceptions for non prospectus
Qualified investors or
Self-certified sophisticated investors and high-net worth
individuals
NB rules on promotions apply to collective investment schemes
ndash (eg crowd funding)
Growth Investment
Investor
Angelssuper angels or VC
Process
LOI
Due Diligence
Documentation (entrepreneurs flexibility v protection of
investment)
Growth Investment cont
Documentation
Subscription and Shareholdersrsquo Agreement
New Articles of Association
Disclosure Letter
LoanFinance Documentation
Option Documentation
New Service Agreements
IP Assignments
OR
Share certificate
Subscription and Shareholders Agreement
Function is To set out terms between parties
Deal with future situationsexit routes
Deal with existing business
Key = to protect the minoritynon-management shareholders
Key Concerns for Investors Warranties ndash To flush out information about the business
DirectorObserver Rights ndash To have a degree of management input and control
Investor Consents ndash To give Investors knowledge of and veto over key matters
Management and Information Rights - To give investors key financial information about company
Restrictive Covenants ndash To prevent key executives from competing and poaching staff and customers
Option pool
Articles of Association
Key Concerns for Investors
Pre-emption rights on new issues of shares and transfers of shares
ndash to avoid being diluted
Restrictions on share transfers ndash the investors are investing in the
entrepreneurs themselves
Drag and Tag Along Rights ndash to stop the minority jeopardising a
deal and to enable them to benefit from exit
GoodBad Leaver provisions ndash to discourage key employees from
leaving
Others (eg dividend preference liquidation preference ldquodown
roundrdquo protection)
Any questions
Mark Phillips
Partner
020 7667 5000
markphillipsharbottlecom
Tax Credits (1) (RampD)
Benefit
SME = 225 of qualifying costs ndash reduce corporation tax or receive a
credit
RampD project seeks to achieve an advance in overall knowledge or
capability in field of science or technology through the resolution of
scientific or technological uncertainty
Not simply an advance in its own state of knowledge and capability
Qualifying costs
Spend on eligible projects on certain categories of expense
Eg
staff costs directly engaged in RampD
software
sub-contractor costs (SME only)
raw materials
Take advice
Tax Credits (2) (new games tax credit)
Consultation and not effective until 2013
Treasury figures games tax fund will be pound15m ndash Y1 and pound35m ndash
Y2
For TV and Animation also
Film tax credit is the model
additional deductionreduce corporation tax
core expenditure
greater support for lower budget
completion date
per projectnot per company (unlike RampD and French tax credits)
cultural test
25 or gtpound20m or 20 ltpound20m
Tax Credits (2) cont
Definition of a GameGames
what element of production
DLC extensions = new product
post launch (eg socialmobile games) activity
MMOS
Cultural Test ndash which body
Practical pointers
cash flowing tax creditsinterim claims
not all production expenditure
Tax Incentives for Shares
Enterprise Investment
Scheme (EIS)
30 income tax relief of cost
up to 300k pa
No CGT
Loss relief (net of initial tax
relief)
CGT deferral relief
(investment year before of
three years after)
Seed Investment Enterprise
Scheme (SEIS)
50 up to pound100k pa
No CGT
20122013 disposals ndash CGT
exemption if proceeds are
re-invested
Tax Incentives for Shares cont
Enterprise Investment
Scheme (EIS)
Qualifying Company
small ndash assets less than 7m
pre money 8m post and less
than 30 employees
up to pound5m from EIS or VCT
no of conditions
Investor
not employees partner or
paid director
owncontrol 30
Seed Investment Enterprise
Scheme (SEIS)
assets not pound200k and pre
money and less than 25
employees and new
business
up to pound150k from SEIS
no of conditions
non executive
owncontrol 30
Business Plan or ProspectusRegulation
Basic Rules
any financial promotion needs to be issued or approved by
authorised person (Financial Services and Markets Act 2000
(ldquoFSMArdquo)
If for more than pound5million and to more than 100 recipients need a
prospectus complying with Prospectus rules and FSMA
Exceptions for non prospectus
Qualified investors or
Self-certified sophisticated investors and high-net worth
individuals
NB rules on promotions apply to collective investment schemes
ndash (eg crowd funding)
Growth Investment
Investor
Angelssuper angels or VC
Process
LOI
Due Diligence
Documentation (entrepreneurs flexibility v protection of
investment)
Growth Investment cont
Documentation
Subscription and Shareholdersrsquo Agreement
New Articles of Association
Disclosure Letter
LoanFinance Documentation
Option Documentation
New Service Agreements
IP Assignments
OR
Share certificate
Subscription and Shareholders Agreement
Function is To set out terms between parties
Deal with future situationsexit routes
Deal with existing business
Key = to protect the minoritynon-management shareholders
Key Concerns for Investors Warranties ndash To flush out information about the business
DirectorObserver Rights ndash To have a degree of management input and control
Investor Consents ndash To give Investors knowledge of and veto over key matters
Management and Information Rights - To give investors key financial information about company
Restrictive Covenants ndash To prevent key executives from competing and poaching staff and customers
Option pool
Articles of Association
Key Concerns for Investors
Pre-emption rights on new issues of shares and transfers of shares
ndash to avoid being diluted
Restrictions on share transfers ndash the investors are investing in the
entrepreneurs themselves
Drag and Tag Along Rights ndash to stop the minority jeopardising a
deal and to enable them to benefit from exit
GoodBad Leaver provisions ndash to discourage key employees from
leaving
Others (eg dividend preference liquidation preference ldquodown
roundrdquo protection)
Any questions
Mark Phillips
Partner
020 7667 5000
markphillipsharbottlecom
Tax Credits (2) (new games tax credit)
Consultation and not effective until 2013
Treasury figures games tax fund will be pound15m ndash Y1 and pound35m ndash
Y2
For TV and Animation also
Film tax credit is the model
additional deductionreduce corporation tax
core expenditure
greater support for lower budget
completion date
per projectnot per company (unlike RampD and French tax credits)
cultural test
25 or gtpound20m or 20 ltpound20m
Tax Credits (2) cont
Definition of a GameGames
what element of production
DLC extensions = new product
post launch (eg socialmobile games) activity
MMOS
Cultural Test ndash which body
Practical pointers
cash flowing tax creditsinterim claims
not all production expenditure
Tax Incentives for Shares
Enterprise Investment
Scheme (EIS)
30 income tax relief of cost
up to 300k pa
No CGT
Loss relief (net of initial tax
relief)
CGT deferral relief
(investment year before of
three years after)
Seed Investment Enterprise
Scheme (SEIS)
50 up to pound100k pa
No CGT
20122013 disposals ndash CGT
exemption if proceeds are
re-invested
Tax Incentives for Shares cont
Enterprise Investment
Scheme (EIS)
Qualifying Company
small ndash assets less than 7m
pre money 8m post and less
than 30 employees
up to pound5m from EIS or VCT
no of conditions
Investor
not employees partner or
paid director
owncontrol 30
Seed Investment Enterprise
Scheme (SEIS)
assets not pound200k and pre
money and less than 25
employees and new
business
up to pound150k from SEIS
no of conditions
non executive
owncontrol 30
Business Plan or ProspectusRegulation
Basic Rules
any financial promotion needs to be issued or approved by
authorised person (Financial Services and Markets Act 2000
(ldquoFSMArdquo)
If for more than pound5million and to more than 100 recipients need a
prospectus complying with Prospectus rules and FSMA
Exceptions for non prospectus
Qualified investors or
Self-certified sophisticated investors and high-net worth
individuals
NB rules on promotions apply to collective investment schemes
ndash (eg crowd funding)
Growth Investment
Investor
Angelssuper angels or VC
Process
LOI
Due Diligence
Documentation (entrepreneurs flexibility v protection of
investment)
Growth Investment cont
Documentation
Subscription and Shareholdersrsquo Agreement
New Articles of Association
Disclosure Letter
LoanFinance Documentation
Option Documentation
New Service Agreements
IP Assignments
OR
Share certificate
Subscription and Shareholders Agreement
Function is To set out terms between parties
Deal with future situationsexit routes
Deal with existing business
Key = to protect the minoritynon-management shareholders
Key Concerns for Investors Warranties ndash To flush out information about the business
DirectorObserver Rights ndash To have a degree of management input and control
Investor Consents ndash To give Investors knowledge of and veto over key matters
Management and Information Rights - To give investors key financial information about company
Restrictive Covenants ndash To prevent key executives from competing and poaching staff and customers
Option pool
Articles of Association
Key Concerns for Investors
Pre-emption rights on new issues of shares and transfers of shares
ndash to avoid being diluted
Restrictions on share transfers ndash the investors are investing in the
entrepreneurs themselves
Drag and Tag Along Rights ndash to stop the minority jeopardising a
deal and to enable them to benefit from exit
GoodBad Leaver provisions ndash to discourage key employees from
leaving
Others (eg dividend preference liquidation preference ldquodown
roundrdquo protection)
Any questions
Mark Phillips
Partner
020 7667 5000
markphillipsharbottlecom
Tax Credits (2) cont
Definition of a GameGames
what element of production
DLC extensions = new product
post launch (eg socialmobile games) activity
MMOS
Cultural Test ndash which body
Practical pointers
cash flowing tax creditsinterim claims
not all production expenditure
Tax Incentives for Shares
Enterprise Investment
Scheme (EIS)
30 income tax relief of cost
up to 300k pa
No CGT
Loss relief (net of initial tax
relief)
CGT deferral relief
(investment year before of
three years after)
Seed Investment Enterprise
Scheme (SEIS)
50 up to pound100k pa
No CGT
20122013 disposals ndash CGT
exemption if proceeds are
re-invested
Tax Incentives for Shares cont
Enterprise Investment
Scheme (EIS)
Qualifying Company
small ndash assets less than 7m
pre money 8m post and less
than 30 employees
up to pound5m from EIS or VCT
no of conditions
Investor
not employees partner or
paid director
owncontrol 30
Seed Investment Enterprise
Scheme (SEIS)
assets not pound200k and pre
money and less than 25
employees and new
business
up to pound150k from SEIS
no of conditions
non executive
owncontrol 30
Business Plan or ProspectusRegulation
Basic Rules
any financial promotion needs to be issued or approved by
authorised person (Financial Services and Markets Act 2000
(ldquoFSMArdquo)
If for more than pound5million and to more than 100 recipients need a
prospectus complying with Prospectus rules and FSMA
Exceptions for non prospectus
Qualified investors or
Self-certified sophisticated investors and high-net worth
individuals
NB rules on promotions apply to collective investment schemes
ndash (eg crowd funding)
Growth Investment
Investor
Angelssuper angels or VC
Process
LOI
Due Diligence
Documentation (entrepreneurs flexibility v protection of
investment)
Growth Investment cont
Documentation
Subscription and Shareholdersrsquo Agreement
New Articles of Association
Disclosure Letter
LoanFinance Documentation
Option Documentation
New Service Agreements
IP Assignments
OR
Share certificate
Subscription and Shareholders Agreement
Function is To set out terms between parties
Deal with future situationsexit routes
Deal with existing business
Key = to protect the minoritynon-management shareholders
Key Concerns for Investors Warranties ndash To flush out information about the business
DirectorObserver Rights ndash To have a degree of management input and control
Investor Consents ndash To give Investors knowledge of and veto over key matters
Management and Information Rights - To give investors key financial information about company
Restrictive Covenants ndash To prevent key executives from competing and poaching staff and customers
Option pool
Articles of Association
Key Concerns for Investors
Pre-emption rights on new issues of shares and transfers of shares
ndash to avoid being diluted
Restrictions on share transfers ndash the investors are investing in the
entrepreneurs themselves
Drag and Tag Along Rights ndash to stop the minority jeopardising a
deal and to enable them to benefit from exit
GoodBad Leaver provisions ndash to discourage key employees from
leaving
Others (eg dividend preference liquidation preference ldquodown
roundrdquo protection)
Any questions
Mark Phillips
Partner
020 7667 5000
markphillipsharbottlecom
Tax Incentives for Shares
Enterprise Investment
Scheme (EIS)
30 income tax relief of cost
up to 300k pa
No CGT
Loss relief (net of initial tax
relief)
CGT deferral relief
(investment year before of
three years after)
Seed Investment Enterprise
Scheme (SEIS)
50 up to pound100k pa
No CGT
20122013 disposals ndash CGT
exemption if proceeds are
re-invested
Tax Incentives for Shares cont
Enterprise Investment
Scheme (EIS)
Qualifying Company
small ndash assets less than 7m
pre money 8m post and less
than 30 employees
up to pound5m from EIS or VCT
no of conditions
Investor
not employees partner or
paid director
owncontrol 30
Seed Investment Enterprise
Scheme (SEIS)
assets not pound200k and pre
money and less than 25
employees and new
business
up to pound150k from SEIS
no of conditions
non executive
owncontrol 30
Business Plan or ProspectusRegulation
Basic Rules
any financial promotion needs to be issued or approved by
authorised person (Financial Services and Markets Act 2000
(ldquoFSMArdquo)
If for more than pound5million and to more than 100 recipients need a
prospectus complying with Prospectus rules and FSMA
Exceptions for non prospectus
Qualified investors or
Self-certified sophisticated investors and high-net worth
individuals
NB rules on promotions apply to collective investment schemes
ndash (eg crowd funding)
Growth Investment
Investor
Angelssuper angels or VC
Process
LOI
Due Diligence
Documentation (entrepreneurs flexibility v protection of
investment)
Growth Investment cont
Documentation
Subscription and Shareholdersrsquo Agreement
New Articles of Association
Disclosure Letter
LoanFinance Documentation
Option Documentation
New Service Agreements
IP Assignments
OR
Share certificate
Subscription and Shareholders Agreement
Function is To set out terms between parties
Deal with future situationsexit routes
Deal with existing business
Key = to protect the minoritynon-management shareholders
Key Concerns for Investors Warranties ndash To flush out information about the business
DirectorObserver Rights ndash To have a degree of management input and control
Investor Consents ndash To give Investors knowledge of and veto over key matters
Management and Information Rights - To give investors key financial information about company
Restrictive Covenants ndash To prevent key executives from competing and poaching staff and customers
Option pool
Articles of Association
Key Concerns for Investors
Pre-emption rights on new issues of shares and transfers of shares
ndash to avoid being diluted
Restrictions on share transfers ndash the investors are investing in the
entrepreneurs themselves
Drag and Tag Along Rights ndash to stop the minority jeopardising a
deal and to enable them to benefit from exit
GoodBad Leaver provisions ndash to discourage key employees from
leaving
Others (eg dividend preference liquidation preference ldquodown
roundrdquo protection)
Any questions
Mark Phillips
Partner
020 7667 5000
markphillipsharbottlecom
Tax Incentives for Shares cont
Enterprise Investment
Scheme (EIS)
Qualifying Company
small ndash assets less than 7m
pre money 8m post and less
than 30 employees
up to pound5m from EIS or VCT
no of conditions
Investor
not employees partner or
paid director
owncontrol 30
Seed Investment Enterprise
Scheme (SEIS)
assets not pound200k and pre
money and less than 25
employees and new
business
up to pound150k from SEIS
no of conditions
non executive
owncontrol 30
Business Plan or ProspectusRegulation
Basic Rules
any financial promotion needs to be issued or approved by
authorised person (Financial Services and Markets Act 2000
(ldquoFSMArdquo)
If for more than pound5million and to more than 100 recipients need a
prospectus complying with Prospectus rules and FSMA
Exceptions for non prospectus
Qualified investors or
Self-certified sophisticated investors and high-net worth
individuals
NB rules on promotions apply to collective investment schemes
ndash (eg crowd funding)
Growth Investment
Investor
Angelssuper angels or VC
Process
LOI
Due Diligence
Documentation (entrepreneurs flexibility v protection of
investment)
Growth Investment cont
Documentation
Subscription and Shareholdersrsquo Agreement
New Articles of Association
Disclosure Letter
LoanFinance Documentation
Option Documentation
New Service Agreements
IP Assignments
OR
Share certificate
Subscription and Shareholders Agreement
Function is To set out terms between parties
Deal with future situationsexit routes
Deal with existing business
Key = to protect the minoritynon-management shareholders
Key Concerns for Investors Warranties ndash To flush out information about the business
DirectorObserver Rights ndash To have a degree of management input and control
Investor Consents ndash To give Investors knowledge of and veto over key matters
Management and Information Rights - To give investors key financial information about company
Restrictive Covenants ndash To prevent key executives from competing and poaching staff and customers
Option pool
Articles of Association
Key Concerns for Investors
Pre-emption rights on new issues of shares and transfers of shares
ndash to avoid being diluted
Restrictions on share transfers ndash the investors are investing in the
entrepreneurs themselves
Drag and Tag Along Rights ndash to stop the minority jeopardising a
deal and to enable them to benefit from exit
GoodBad Leaver provisions ndash to discourage key employees from
leaving
Others (eg dividend preference liquidation preference ldquodown
roundrdquo protection)
Any questions
Mark Phillips
Partner
020 7667 5000
markphillipsharbottlecom
Business Plan or ProspectusRegulation
Basic Rules
any financial promotion needs to be issued or approved by
authorised person (Financial Services and Markets Act 2000
(ldquoFSMArdquo)
If for more than pound5million and to more than 100 recipients need a
prospectus complying with Prospectus rules and FSMA
Exceptions for non prospectus
Qualified investors or
Self-certified sophisticated investors and high-net worth
individuals
NB rules on promotions apply to collective investment schemes
ndash (eg crowd funding)
Growth Investment
Investor
Angelssuper angels or VC
Process
LOI
Due Diligence
Documentation (entrepreneurs flexibility v protection of
investment)
Growth Investment cont
Documentation
Subscription and Shareholdersrsquo Agreement
New Articles of Association
Disclosure Letter
LoanFinance Documentation
Option Documentation
New Service Agreements
IP Assignments
OR
Share certificate
Subscription and Shareholders Agreement
Function is To set out terms between parties
Deal with future situationsexit routes
Deal with existing business
Key = to protect the minoritynon-management shareholders
Key Concerns for Investors Warranties ndash To flush out information about the business
DirectorObserver Rights ndash To have a degree of management input and control
Investor Consents ndash To give Investors knowledge of and veto over key matters
Management and Information Rights - To give investors key financial information about company
Restrictive Covenants ndash To prevent key executives from competing and poaching staff and customers
Option pool
Articles of Association
Key Concerns for Investors
Pre-emption rights on new issues of shares and transfers of shares
ndash to avoid being diluted
Restrictions on share transfers ndash the investors are investing in the
entrepreneurs themselves
Drag and Tag Along Rights ndash to stop the minority jeopardising a
deal and to enable them to benefit from exit
GoodBad Leaver provisions ndash to discourage key employees from
leaving
Others (eg dividend preference liquidation preference ldquodown
roundrdquo protection)
Any questions
Mark Phillips
Partner
020 7667 5000
markphillipsharbottlecom
Growth Investment
Investor
Angelssuper angels or VC
Process
LOI
Due Diligence
Documentation (entrepreneurs flexibility v protection of
investment)
Growth Investment cont
Documentation
Subscription and Shareholdersrsquo Agreement
New Articles of Association
Disclosure Letter
LoanFinance Documentation
Option Documentation
New Service Agreements
IP Assignments
OR
Share certificate
Subscription and Shareholders Agreement
Function is To set out terms between parties
Deal with future situationsexit routes
Deal with existing business
Key = to protect the minoritynon-management shareholders
Key Concerns for Investors Warranties ndash To flush out information about the business
DirectorObserver Rights ndash To have a degree of management input and control
Investor Consents ndash To give Investors knowledge of and veto over key matters
Management and Information Rights - To give investors key financial information about company
Restrictive Covenants ndash To prevent key executives from competing and poaching staff and customers
Option pool
Articles of Association
Key Concerns for Investors
Pre-emption rights on new issues of shares and transfers of shares
ndash to avoid being diluted
Restrictions on share transfers ndash the investors are investing in the
entrepreneurs themselves
Drag and Tag Along Rights ndash to stop the minority jeopardising a
deal and to enable them to benefit from exit
GoodBad Leaver provisions ndash to discourage key employees from
leaving
Others (eg dividend preference liquidation preference ldquodown
roundrdquo protection)
Any questions
Mark Phillips
Partner
020 7667 5000
markphillipsharbottlecom
Growth Investment cont
Documentation
Subscription and Shareholdersrsquo Agreement
New Articles of Association
Disclosure Letter
LoanFinance Documentation
Option Documentation
New Service Agreements
IP Assignments
OR
Share certificate
Subscription and Shareholders Agreement
Function is To set out terms between parties
Deal with future situationsexit routes
Deal with existing business
Key = to protect the minoritynon-management shareholders
Key Concerns for Investors Warranties ndash To flush out information about the business
DirectorObserver Rights ndash To have a degree of management input and control
Investor Consents ndash To give Investors knowledge of and veto over key matters
Management and Information Rights - To give investors key financial information about company
Restrictive Covenants ndash To prevent key executives from competing and poaching staff and customers
Option pool
Articles of Association
Key Concerns for Investors
Pre-emption rights on new issues of shares and transfers of shares
ndash to avoid being diluted
Restrictions on share transfers ndash the investors are investing in the
entrepreneurs themselves
Drag and Tag Along Rights ndash to stop the minority jeopardising a
deal and to enable them to benefit from exit
GoodBad Leaver provisions ndash to discourage key employees from
leaving
Others (eg dividend preference liquidation preference ldquodown
roundrdquo protection)
Any questions
Mark Phillips
Partner
020 7667 5000
markphillipsharbottlecom
Subscription and Shareholders Agreement
Function is To set out terms between parties
Deal with future situationsexit routes
Deal with existing business
Key = to protect the minoritynon-management shareholders
Key Concerns for Investors Warranties ndash To flush out information about the business
DirectorObserver Rights ndash To have a degree of management input and control
Investor Consents ndash To give Investors knowledge of and veto over key matters
Management and Information Rights - To give investors key financial information about company
Restrictive Covenants ndash To prevent key executives from competing and poaching staff and customers
Option pool
Articles of Association
Key Concerns for Investors
Pre-emption rights on new issues of shares and transfers of shares
ndash to avoid being diluted
Restrictions on share transfers ndash the investors are investing in the
entrepreneurs themselves
Drag and Tag Along Rights ndash to stop the minority jeopardising a
deal and to enable them to benefit from exit
GoodBad Leaver provisions ndash to discourage key employees from
leaving
Others (eg dividend preference liquidation preference ldquodown
roundrdquo protection)
Any questions
Mark Phillips
Partner
020 7667 5000
markphillipsharbottlecom
Articles of Association
Key Concerns for Investors
Pre-emption rights on new issues of shares and transfers of shares
ndash to avoid being diluted
Restrictions on share transfers ndash the investors are investing in the
entrepreneurs themselves
Drag and Tag Along Rights ndash to stop the minority jeopardising a
deal and to enable them to benefit from exit
GoodBad Leaver provisions ndash to discourage key employees from
leaving
Others (eg dividend preference liquidation preference ldquodown
roundrdquo protection)
Any questions
Mark Phillips
Partner
020 7667 5000
markphillipsharbottlecom
Any questions
Mark Phillips
Partner
020 7667 5000
markphillipsharbottlecom
![[Piano] mark phillips sight-read any rhythm instantly](https://img.pdfslide.net/doc/110x75/55a2ae391a28abb1568b4835/piano-mark-phillips-sight-read-any-rhythm-instantly.jpg)
