Earlier this month Seedrs announced that they are introducing direct investment for fundraising campaigns on their crowdfunding platform.
What does that mean?
One of the key innovations introduced by the Seedrs platform since their start was the so-called ‘nominee structure’. This structure involved that many individual investors, each with a relatively small holding in a company, nominated Seedrs to hold the legal title to the shares, with the relative benefits going to the investors themselves.
This innovation allowed Seedrs and companies on its platform to raise funds from a large volume of individuals investing small individual sums without having to go through the infinite paperwork that would be necessary to sign an agreement with each of them.
Seedrs becomes the only shareholder that is indicated on the company’s cap table, simplifying the crowdfunding process for the fundraising company, but also allowing investors to be protected by the agreements negotiated by Seedrs, including tag-along and drag-along clauses and other protections that would be hard to negotiate for non-professional investors.
Investors are also able to seamlessly trade shares in the Seedrs Secondary Market, thanks to the fact that Seedrs remains the nominee for all shares.
The introduction of direct investment doesn’t affect investors and companies that want to keep using the nominee structure, but opens the system to bigger investors who want to have direct control over their shareholdings and agreements.
How does it work?
From now on, companies will be able to specify a threshold above which they will accept direct investments, if they wish to do so.
This threshold is disclosed within the campaign, so that any investors investing more than that will be able to choose whether to use direct or nominee holding.
Direct investors will so be able to control all administrative aspects of their shareholdings, including tax relief matters and exits. They won’t have access to the company’s post-investment page on Seedrs, nor to the Seedrs Secondary Market.
How much does it cost?
While investors who invest via the nominee structure can invest for free and only pay a 7.5% fee on disposal of their shares, direct investors will be subject to a one-time investment fee of 1.5% of the amount invested, with the fee capped at £250.