What is the purpose of a nominee company?

Investors can either hold shares directly in the operating company, or in a nominee company which holds shares in the operating company. Using a nominee means that the company will end up with only 1 extra shareholder (the nominee) after the offer has closed. Usually this means all Snowball Effect investors will hold shares in the nominee.

The common objectives of a nominee company are:

• Manage Takeovers Code requirements. Some companies wish to avoid a body of regulation called the Takeovers Code, which applies to companies with more than 50 (voting) shareholders and 50 share parcels. This objective can also be met by offering non-voting shares. And the Takeovers Panel has issued a partial exemption from the Takeovers Code for smaller companies.
• Manage financial reporting obligations. Some companies wish to avoid enhanced financial reporting obligations that apply to companies with 10 or more shareholders. If desired, this objective can also usually be met by offering non-voting shares.
• Manage administration of a large number of shareholders. The occasional company is concerned about ongoing administration for a large number of shareholders. We don’t consider this perception to be true, assuming professional share registry management and electronic communications (we provide these solutions).
• Manage concerns about follow on investment. Some companies intend to raise funds in the future from venture capital or private equity organisations, who may have a preference for fewer shareholders on the share register.

If this is of interest to you, Snowball Effect can work with you to create a clear plan and let you know about the various management services available to see what works best for you.

Please note that this information does not constitute legal advice. Each company should seek their own professional advice.