What is the principal role of the lead investor?
A lead investor has an ambassadorial role and may act as a point of contact between investors, the Fundraising Company and other third parties where investors wish them to do so. The Lead Investor is usually the first investor to indicate their financial support for the Fundraising Company and also contributes time and expertise to ensure that the round is closed successfully. The Lead Investor will become party to the investment agreement together with other investors in the syndicate.
The lead investor shall not:
(a) undertake any activities which are regulated, such as making any personal recommendations or providing advice to Investors where such activities would be regulated activities under FSMA;
(b) make any decisions on behalf of Investors, unless explicitly instructed to do so by Investors; or
(c) perform any action or take any step which is not permitted by Fundy in its instructions to lead investors from time to time
Note: We only facilitate the public funding of companies that have a lead investor in place and a private investment amount in place—normally 1⁄3 of the total investment amount being sought after. This will not always come from one source but in most cases the lead investor will be one of the primary contributors to this 1⁄3.
Who can act as a lead investor?
We typically expect a lead investor to have either (i) worked in a professional capacity in the private equity, venture capital, or banking industry, (ii) been instrumental in the growth of a business in a similar sector to that of the Fundraising Company, or (iii) made recent, significant investments in private companies, either alone or as part of a syndicate or angel network.
What are the ongoing responsibilities of the lead investor after a successful investment offer?
In the majority of cases, the lead investor will have a minimal administrative role after the funding round has closed. Specific responsibilities will be set out in the relevant investment agreement. For example, if using a nominee structure, where investors specifically so choose, the Lead Investor may be appointed to act as a proxy or under a specific power of attorney in relation to a corporate action.
In case of a loan structure,, the lead investor may have an ongoing shareholder liaison role whereby they may be asked to facilitate the transmission of information to investors and, if requested to do so, cast votes on their behalf. In such a case, a power of attorney in favour of the lead investor, would be granted in relation to a specific corporate action or a specific meeting of shareholders of the Fundraising Company.
Can a lead investor sell their shares?
The role and involvement of a lead investor is an important one for the other investors. This means that a lead investor is usually expected to hold their shares during an agreed lock-up period unless investors agree to a release.
What is a Syndicate Administrator?
The Fundraising Company or the lead investor may (with the agreement of Fundy), appoint a Syndicate Administrator. This person is then authorised to act on behalf of the Fundraising Company or the lead investor in connection with the activities related to the investment offer.
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