Financial Promotion

Financial Promotion

Posted by Catherine O’Riordan, on February 26, 2020. Tags: , ,

We have advised on the contents of a shareholders’ agreement to be circulated to potential investors in a private limited company.  We were required to consider very carefully whether the circulation of the document would constitute a financial promotion for the purposes of the Financial Services and Markets Act 2000 and, if so, whether there were any exemptions the client company might be able to take advantage of.  If there were no exemptions then the document would have to be approved by an authorised person at considerable extra expense.  

Our detailed research indicated that the potential investors were all either high net worth individuals or sophisticated investors, as defined by the legislation, and that the company could therefore rely on the exemptions for promotions to those two groups of recipients.  We prepared the required high net worth and sophisticated investor certificates and the Board minutes and other ancillary papers documenting the completion of the shareholders’ agreement.  It was important that the company could satisfy itself that the relevant certificates had been signed and returned before it proceeded to issue shares, so the order of proceedings on the day of completion had to be expertly managed.

There were subsequently several further rounds of investment in the company and we were able to draw on much of the material we used in the first round to ensure that these proceeded just as smoothly.