Offering shares in ltd company

[alexdjm1973]

Hi,

My partner and I are producing a film. We want to raise the finance for the film from friends, family, business aquaintances and potentially strangers (through mailshots in the local area, for example).

The Ltd company does not yet exist. We plan to offer shares in the new Ltd company in return for investment. Parties will be invited to apply for shares and their money will be held by a firm of accountants until we have raised the full amount (£150,000). At this point we will incorporate the company and issue the shares.

Are we allowed to advertise by way of an email or mailshot to anyone including strangers, or are we restricted to "sophisticated investors". What about friends and family?

We'd be really grateful for any advice.

Alex

 

[Williams lester]

Not sure that this is the right way to go with this, have you spoken to your accountant regarding how to do it? Also is your accountant familiar with film production and all the associated areas of FTR?

Having done a couple of these, our clients opted for a slightly different approach, with no shares being sold, PM me if you need any specific advice....but....ensure your accountant is familiar with film production companies, as it is a fairly specialist area.

 

[moduslegal]

Without spending a lot of time on this, from memory if you start offering investment opportunities like this to strangers you are going to fall foul of the Financial Services and Markets Act 2000 and specifically the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005.

There is basically no way round this that I know, unless you do it properly within what is allowed within the Financial Services and Markets Act 2000. Get in touch with an IFA who is an 'authorised person' and see if they can think of a way round it.

 

[alexdjm1973]

Hi - Thanks for the reply. Do you think family / friends/ business aquaintances is ok though? Thanks Alex

 

[limessl]

What you're describing is an Initial Public Offering. You'd need a plc for that, not a ltd company. Rules for plc's are much more onerous.

Remember that once you've issued shares, most companies have a provision for pre-emptive rights so you'd have to offer your existing shareholders the opportunity to invest more money before you offered them to an outsider.

If you're thinking of just trying to club together a few mates to raise the money, you cannot do this by way of advertising. The whole point of "private limited companies" are they're private, i.e. not generally available to the public at large.

If you were to do the IPO I think you'd actually have to incorporate the company first? a plc must have a minimum of £50,000 share capital.

 

[limessl]

One way round it *might* be to hold discussions about investing in a film, and then when you've got everyone involved in the project who wants to be, have a meeting and decide at that meeting that you'll pursue the project by way of creating a limited company in which people will invest their appropriate share of the required funds.

I believe that would constitute a private company, because the people who were not at the initial meeting would not be able to participate. I'm sure there's a ton of other legal issues you might need to get round too!

What about shareholder agreements? What if one shareholder wants to sell to another one, or even give their shares away to a family member? What if you get all these people to invest and then splurge it all on fast cars and loose women? How much control will you give the shareholders in return for their cash?