
Equity crowdfunding explained
In this article, we look at how startups can raise capital through Equity crowdfunding
November 15, 2021
Having a scalable business model is the key feature of a startup, and scaling up requires cash. That is why raising capital becomes a common key activity for startup founders.
In this article we will look at:
Before investing in a startup or raise capital, an investor will usually conduct the following due diligence investigations:
The due diligence process can be extremely time consuming, so it is important to ensure you have the following items in place before raising capital:
The key legal documents required to issue new shares to an investor are:
(a) a share subscription agreement, which usually sets out:
(i) the subscription amount to be paid for the shares;
(ii) the amount and type of shares to be issued to the investor;
(iii) the completion date for the transaction;
(b) a share issue pack, containing:
(i) a board resolution approving the issue of the new shares;
(ii) an updated member’s register;
(iii) an allotment journal, recording the allotment of the new shares;
(iv) a new share certificate to be issued to the investor;
(c) an accession deed, which is where the investor agrees to be bound by the shareholders agreement relating to the startup.
After the investor has paid the share subscription amount to the startup, the startup will need to formalise the share issue by:
Before making offers to investors to raise capital in the startup, it is important to ensure the startup either:
The exemptions from the requirement to lodge a disclosure document are:
In this article, we look at how startups can raise capital through Equity crowdfunding
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