We’ve created a best of breed equity crowdfunding platform which provides protection for investors, allowing them to focus on the companies and their ideas.
If you’ve heard of equity crowdfunding then you may be aware that some of the platforms offer very different models for allowing the crowd to invest in young companies.
The fun part of crowdfunding is finding exciting new ideas you believe in and making them happen. However, at ShareIn we recognise that it is also important that investors are properly protected, as historically many poorly structured deals have allowed smaller investors to be abused. It might appear a dull topic to new investors, which is why we want this protection as a default on ShareIn, allowing investors to focus on companies and their ideas.
Launching a little later than some other platforms has provided ShareIn with the chance to combine what we see as the best features from the different models out there. The ShareIn structure provides a fair legal framework for both sides that is tailored for crowdfunding, avoiding many pitfalls cited by critics of equity crowdfunding. The ShareIn hybrid solution also avoids a middleman (and their fees) between the shareholder and the investee company.
Nick Britton (From What Investment) wrote a really interesting article that helps to point out the pros and cons of a couple of existing crowdfunding models.
So what’s the best way for the crowd to hold shares using equity crowdfunding? Direct ownership or nominee structure?
We like to think we offer the best of both worlds.
Direct ownership with no middlemen
Direct shareholding gives investors a true sense of ownership and control. The shares investors buy will have their name on them. This has been the model most commonly accepted by investors in the UK market – we think for good reason and is the most suitable for the purposes of crowdfunding. There are no fees for investors, either upfront or when the company exits, costs that can erode investors returns significantly.
Every share bought in a pitch on ShareIn has pre-emption, voting and drag along and tag along rights
We don’t think it’s fair if the crowd don’t get a vote in important issues concerning their company, and don’t get the chance to invest in future funding rounds before new investors. If successful in their pitch, all companies adopt the ShareIn Standard Articles of Association. This means that every share bought in a pitch on ShareIn allows investors to vote, with the option to invest in future funding rounds, and provides some basic minority protections.
Professional grade investment agreements
In addition, we recommend adopting the ShareIn Standard Investment Agreement to provide enhanced professional grade protection for both investors and the investee company.
However choice is good – we let investee companies decide if they wish to adopt our Standard Investment Agreement or not. If they elect to do this it’s shown in their pitch summary and investors can gain comfort from this.
Professional investors know that having an Investment Agreement in place helps prevent abuse and ensure that they earn returns if the company is successful.
The ShareIn Standard Investment Agreement includes contains various clauses, including:
- Warranties granted to ShareIn Investors at Completion
- SEIS / EIS Tax Relief for individual ShareIn Investors
- What the Company is not allowed to do without ShareIn Investor Majority permission
- Good governance obligations of the Board
- Information for the ShareIn Investors
- Dividend policy
- Business restrictions
All of the information regarding Articles of Association and Investment Agreements is available up front here before you invest – so you know exactly what you’re buying before you invest.
We’re very excited about the launch of our beta site and hope you’ll agree that we’ve cherry picked the best bits from the crowdfunding market and created a fantastic hybrid share structure!
photo credit: benjamint444
Tags: ShareIn Updates