Offer documents are aimed at people who may not be sophisticated investors so they should be written in an accessible and engaging style. It is important to get the balance right between writing a marketing document that clearly communicates the investment proposition, and a non-technical document which nevertheless provides accurate financial and legal information.
The length of a time-bound offer document should reflect the size of the offer. Small offers, of less than £100,000, may typically be shorter than 2,000 words, whereas medium-sized offers of between £100,000 and £500,000 may warrant a document of up to 4,000 words. Offers seeking to raise larger amounts should be commensurate in length, but not so long as to deter applicants from reading them. The use of small print, technical language, unnecessary details, or other devices to discourage applicants from fully reading the document, should be avoided.
There are eight main elements to all time-bound offer documents:
The purpose of the investment: This describes the purpose of the enterprise and how it will benefit members and/or the broader community. It should explain how such benefits will be delivered, distinguishing between internal and external delivery mechanisms (see Section 6.1).
Business plan: The document should provide a summary of the projected income, expenditure and profitability of the society for at least three years after investment. A copy of the business plan with evidence supporting these projects should normally be available to all applicants.
Capital requirements: The total capital required for the investment project should be clearly stated, along with a statement of how this capital will be used, distinguishing between expenditure on fixed assets and working capital.
Fundraising targets: The total amount of capital required should be stated, along with the minimum amount, target amount and maximum amount of share capital sought. If the targets include capital from other sources, these should be stated, along with details of the cost of this capital. Details should also be given of what will happen if the offer is under- or over-subscribed. Any administrative charges for investments and/or refunds should also be clearly stated.
The offer period: The opening and close dates of the offer should be stated, along with any contingency arrangements for extensions to the offer period. The timetable for implementing the investment project should also be outlined, together with an estimate of when the society will start trading.
Minimum and maximum investments: The minimum and maximum amount that can be invested by an individual applicant should be stated, along with any provisions for buying shares in instalments.
Financial returns: There should be a statement of the society’s policies regarding interest on share capital, dividends on transactions (if relevant), together with any forecasts for future interest and dividend rates, if relevant.
Tax relief: If the society has obtained advance assurance from HMRC that the offer is eligible for tax relief through the Enterprise Investment Scheme, Seed Enterprise Investment Scheme or Social Investment Tax Relief this should be mentioned. If advance assurance has been applied for, but not obtained prior to the launch of the offer, any reference to tax relief should be qualified, noting that the society may not be eligible. Applicants should also be advised to check their own eligibility for tax relief, as individual circumstances can and do vary. Sections 8.4 to 8.6 provide more information about these tax relief schemes.
Track record: The offer document should summarise the track record of the society, its board and senior managers (if any). It should also identify any personal interests board members may have in the offer, and explain what actions have been taken to address potential conflicts of interest. If the offer is made by an established society, it should include a summary of the previous three years of trading and its current financial position, along with links to its full annual reports for the same years, including any social performance data (see Section 4.5.9).
Basic information: This should include any information listed in Section 4.2 which has not been provided elsewhere in the document, and may include statements on:
- Capital-at-risk warning
- Type of share capital being offered
- Democratic rights of members
- Eligibility for membership
- Governing document
- Money laundering
- Conflicts of interest
If you have any questions or suggestions for new information you would like to find in the Handbook, contact the team by email at [email protected]