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Senior Partner
Senior Partner, Solicitor
Category: Law
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Experience:  Solicitor with more than 30 years experience
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We are looking to raise finance via Crowd Funding - can we

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We are looking to raise finance via Crowd Funding - can we do so by offering equity via "special shares" with no voting rights and separate to other areas of the business? eg. Can we issue 300 shares in "Project A" and offer 150 to investors?
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Customer: replied 3 years ago.

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Hi thanks for your question. I afraid this is far from simple and it is nowt just a question of Company Law . You can in theory issue a non voting share whose participation is limited to certain specified underlying business assets. MIt is not easy to draft the rights attached but is is possible.However such an instrument raises all sort of issues about the way funds are invested and how the business is run and is highly unlikely to be attractive to investors unless structured as some form of securitised bond where the underlying assets are protected for the benefit of the investors and not for the shareholders generally.
Secondly most crowd funding platforms mandate the structure you use and I would not expect them to allow what you propose.
If you are not using a crowd funding platform but trying to do it yourself the you are likely to fall foul of the law of collective investments schemes and it would be illegal unless correctly regulated.
Overall you would be better to ring fence the venture in a new company and issue shares in that. I think you will find most investors in a new start up will not be prepared to have non voting shares.
Senior Partner, Solicitor
Category: Law
Satisfied Customers: 13329
Experience: Solicitor with more than 30 years experience
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