How the Nominee Structure works for Spark Crowdfunding investors
When you buy shares in a company on the Spark Crowdfunding platform, we (at Spark Crowdfunding) aggregate all of these investments into one large investment amount.
We do this for several reasons. Firstly, under Irish statute law, private companies may not have more than 149 shareholders. Crowdfunding campaigns, by their very nature, create lots of small to medium sized shareholders for a private company and the only way they can all become shareholders is if they come together as a single shareholder.
Secondly, it makes it much easier for the company raising funds on the Spark platform to raise funds at a later date (after their crowdfunding round) from (say) a Venture Capital investor if they have a relatively small number of shareholders in their company.
The cleanest, simplest and least expensive way to aggregate all shareholders from an equity crowdfunding round is to use a vehicle known as a Nominee Company.
In layman’s terms, a Nominee shareholder is one who holds shares on behalf of the actual owner (beneficial owner) under a custodial agreement.
Legal Ownership versus Beneficial Ownership
Companies that raise funds on Spark Crowdfunding use a company called Pearse Trust to manage the Nominee vehicle that holds all of the new shares that have been purchased in the crowdfunding round.
As an investor in a company whose shares are held in a Nominee company you are the beneficial shareholder in that company. The legal shareholder is Pearse Nominees Limited (PNL). PNL hold a single share certificate for all of the shares that are cumulatively held by the members of the Nominee company.
All of the individual investors have rights to a percentage of those total shares in direct proportion to the size of investment they have made in the company that raised the funds.
Pearse Trust Ltd and Pearse Trust Nominees Ltd
Pearse Trust Limited (CRO#: 111529) is a legal and company secretarial business that is based in Sandyford, Co Dublin and has operating in this specialist area since the current directors Joseph Hickey and Grainne Riordan founded the company in 1985.
Pearse Trust Nominees Limited (CRO#: 130202) was incorporated in 1988 and is the vehicle that Pease Trust uses to host its nominee structures.
Almost all of the companies that have raised funds on the Spark Crowdfunding platform use the services of Pearse Trust to manage the relationship between the new shareholders and the company that has just raised funds. It should be noted that Spark Crowdfunding is not a party to the Nominee arrangements and plays no role in the relationship between Pearse Trust and the company that has just raised the funds and its new investors. However, we are available to answer any questions that an investor may have about how a Nominee vehicle operates.
Role of Pearse Trust
Once an equity crowdfunding campaign has finished on the Spark Crowdfunding platform, legal agreements are prepared to protect the new investors. A company that retains Pearse Trust to manage the shareholder arrangements will instruct Pearse Trust to email all of the new investors with information about the crowdfunding campaign and a copy of the legal agreement that governs their investment. Pearse Trust then gathers all of the signatures from the new investors, confirming their intention to proceed with the investment.
From that point on, all shareholder communications from the company that has raised the funds will come from Pearse Trust, as the Nominees. The Nominee is structured so that not all members need to vote, and of those who do, 50% of the shareholding + 1 share will decide the result of the resolution. The whole block in the Nominee will then vote accordingly.
Being a part of a nominee does not dilute your rights as a shareholder in any way. Your rights as a shareholder are exactly the same as if you held the shares in your own name on the Shareholder register.
Please contact us if you have any questions about this.