Whether you're just starting out in business or you're a seasoned professional, when your business needs more money, you can fund your business through several ways:
Using your own money (a.k.a bootstrapping)
Borrowing, eg loans from a bank, friends, family. Also known as debt capital.
Getting investors on board in return for a stake in the business, also known as equity capital. This includes crowdfunding and investors.
Different sources might be more appropriate in certain industries or at certain stages of business.
If you decide that the best way to raise capital and fund your business is through shares, the activity will be governed by the Financial Markets Authority of New Zealand (FMA) and the Financial Markets Conduct Act 2013 (FMC). Lucky for you, we have a practical grasp of the commercial issues around raising capital this way.
The FMC changed the way securities (including shares, bonds and debt investments) had been offered in New Zealand for the last 35 years and replaces the Securities Act 1978 and Securities Markets Act 1988.
Broadly, the FMA requires any offer of shares to be accompanied by a full suite of disclosure documents in accordance with the FMCA, which can be time-consuming and costly to prepare. There is also ongoing reporting required, which is where having a professional team including an experienced lawyer (and accountant) will help a lot.
We've advised a number of start-ups on their capital and corporate structures - some have now grown into important players in their markets as a result of public capital raising initiatives. We also advise finance companies and other lenders on their debt security issues.
Syndication is generally regarded as the combination of persons for a common interest. If you've got grand plans for your business and know other experts that think a similar way, syndication may be a good way for you and the 'syndicated entity' to get a better return. You'll have a greater sum for investment and can purchase better quality assets - much more cost effective than individual parties purchasing assets. It can also provide an opportunity for divestment over a range of assets, industries and locations.
Syndicates are now common for the likes of race horses, commercial property and farms to facilitate development that the individuals could not undertake or fund to the same level. With success across multiple industries already, we are starting to see a realisation that other assets or undertakings could also benefit and prosper from being syndicated.
A limited partnership is corporate structure with separate legal personality (like a company) which offers limited liability to investor partners.
It's a form of partnership involving general partners, who are liable for all the debts and liabilities of the partnership; and limited partners, who are liable to the extent of their capital contribution to the partnership.
Features of limited partnerships include:
separate legal personality,
an indefinite lifespan, if desired,
'safe harbour activities' - defined activities that limited partners may involve themselves in while not participating in the management of the limited partnership,
Every limited partnership must have a partnership agreement between partners that establishes a limited partnership, and governs the terms and conditions of the partnership relationship.
Before registration with the NZ Companies Office can take place, the general partner, or their agent, must certify that the proposed partners of the limited partnership have entered into a partnership agreement that complies with the Limited Partnership Act 2008.
Venture Capital (VC) is a form of private equity and a type of financing that investors provide to start-up companies and small businesses that are believed to have long-term growth potential.
Venture capital generally comes from well-off investors, investment banks, and any other financial institutions. New Zealand has a number of methods of seeking investment in this manner, which is just one of our areas of expertise.
For expert advice on how you could structure and fund your business contact:
