I am planning to incorporate an LTD and would like to sell shares to obtain working capital. My plan is to begin the LTD with 1000 shares and sell 400 of the shares to private investors. I would sell the 400 shares for a sum of 1 million pounds.
I can organize and writing the business plan including the financial costs and potential income projections, but what are the legal points I need to know for a private share offering for private investors?
I also need to know the guidelines I must follow to be able to sell the shares to private investors without breaking UK Security Laws? I believe your FCA is responsible for overseeing such matters.
I am not interested in attempting to offer a public offering only a private offering.
My intention is to purchase a list of qualified UK investors and solicit the sale of shares by providing the investors with a complete and thorough business plan and private share offering documentation.
The main regulations covering making private offers of shares are contained in the Financial Promotion Order 2005 and Prospectus Directive. The exemptions are similar (FPO – self certified high net worth individuals or certified sophisticated; Prospectus Directive qualified investor selling restriction). See here for further information:
Marketing and offering shares in private companies is a nuanced area and you need to adopt the right carefully considered approach in how you both 1) approach investors and 2) leave a safe audit trail. It is possible to raise money without being, or working with, a FCA authorised corporate finance firm.
One thing you definitely can’t do is to mass mail the formal offer documents. However you could do a more restricted and general email that gives very limited information on what the offer could be and has the purpose of getting qualified investors to then approach you.
Cold calling is not recommended but if you do you need to be careful to give very limited information in the first instance, then get potential qualified investors to email you in order to sign off on the self certification documents before supplying them with the offer documents. I.e. like the paragraph above you need to engineer a ‘reverse solicitation’ situation so that you can be comfortable there will be no people complaining to the FCA, regulatory issues or liability incurred. Basically you want to be sure you have a concrete legitimate lead before you provide them with the private placement memorandum and subscription agreement.