New avenue for capital raising - small offers exclusion


June 29 2015


The recently introduced Financial Markets Conduct Act 2013 has completely overhauled New Zealand’s capital markets and financial services laws. One key change is the introduction of new avenues for companies seeking to raise capital by issuing shares to existing shareholders or proposed new investors. The most notable of these is the new exclusion for ‘small offers’.

The small offers exclusion allows companies to raise up to $2 million from up to 20 investors in any 12-month period, without needing to provide the investors with lengthy and expensive disclosure documents. In calculating the thresholds, investors who fall within other exclusions provided in the Act are excluded. This allows the small offers exclusion to be usefully adopted alongside companies’ other targeted capital raising offers, for example, alongside offers to eligible investors.

In order to qualify, the offer must also constitute a ‘personal offer’. This generally means that the person must be likely to be interested in the offer, having regard to their previous contact or connections with the company (including, for example, their participation in an angel network).

Where the small offers exclusion is available, companies must include a warning statement on every document provided to investors which contains the key terms of the offer. The company must also notify the Financial Markets Authority of their reliance on the exclusion. In comparison to the usual disclosure requirements, these minor requirements significantly lower compliance costs for companies, meaning that the new small offers exclusion adds significant flexibility to companies conducting early-stage capital raising.

If you would like help understanding how this applies to your company, please get in touch with our commercial lawyers today.


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