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Crowd Funding, Small Offers and the Takeovers Code

Crowd Funding, Small Offers and the Takeovers Code

Phase 1 of the Financial Markets Conduct Act 2013 (the “FMC Act”) came into effect on 1 April 2014.

The FMC Act introduces a number of new exclusions from disclosure for offers of financial products. Some exclusions, such as for crowd funding through licensed intermediaries and for “small offers”, are aimed at making it easier for small and medium sized companies to raise capital.

“Companies taking advantage of the exclusions from disclosure under the FMC Act to raise capital need to be aware that they could become, or may already be, subject to the Takeovers Code and to other regulatory regimes in doing so”, the Chairman of the Takeovers Panel, Mr David Jones, said today.

A company becomes subject to the Takeovers Code as soon as it has 50 or more shareholders (holding voting shares) and 50 or more share parcels. The Panel is not averse to companies deciding to structure their holdings so that they do not fall under the definition of “Code company”, provided that the structuring is undertaken in a manner that complies with the Takeovers Code (see paragraph 25 of the Panel’s Guidance Note for Small Code Companies).

“Issuers of securities under the FMC Act may wish to seek advice from a lawyer experienced in takeovers and corporate structuring if they are in doubt as to how the Takeovers Code might impact on them” said Mr Jones.

Licensed intermediaries offering crowd funding services can help by encouraging issuers to take specific legal advice on this point.

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