Classified as high-risk, these early stage investments are best entered into with a medium-term view and, as the shares are not publicly traded, it can be difficult to sell them and there is a risk of loss of some or all of your capital invested.
However, this speculative form of investment offers experienced investors the potential of high returns and substantial tax breaks. For anyone interested in the potential benefits of Venture Funding these guidelines will help you with the basics.
Why invest in Pre-IPOs?
1. Growth Prospects
The potential for high returns to investors is often greater at the early stages, before the company becomes quoted or listed on the stock market.
2. Tax Efficient
Investors can take advantage of significant tax breaks with investments that qualify for the Enterprise Investment Scheme (EIS).
Clients holding liquid funds within their pensions can also invest a percentage of these in unquoted securities. Currently any gain arising from the sale of an investment is free of capital gains tax.
What is the Enterprise Investment Scheme (EIS)?*
The Enterprise Investment Scheme is a government introduced scheme intended to encourage investors to support growing businesses. It provides tax relief for investors who own shares in qualifying companies. There are, at present a number of advantages to investing in an EIS qualifying equity at present, including:
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Exemption from Capital Gains Tax (CGT) on up to £500,000 for any gains made on disposal of shares (after three years)
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Unlimited CGT - Tax on gains realised on a different asset can be deferred indefinitely, where disposal of that asset was less than 36 months before the EIS investment or less than 12 months after it.
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Capital Gains Taper Relief on up to a maximum of 10 per cent on investments over £500,000
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Up to 52 per cent loss relief which can be offset against income of capital gains for losses made on disposing of shares (after three years)
What are the requirements for Venture Funding?
Hoodless Brennan is committed to lowering the barriers, and offering clients access to the pre-IPO market.
Due to the high risk nature of Pre-IPO investments, only suitably qualified investors should consider investing in this market. In order to gain access to Venture Funding investment opportunities, Hoodless Brennan requires that its clients:
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Should have an annual income of at least £100,000 or an investment portfolio of £250,000
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Demonstrate they have the knowledge and understanding to view Venture Funding investment opportunities.
In order to satisfy our criteria, prospective clients will be required to complete a 'Client Circumstances Form' before having access to Venture Funding opportunities.
Please note: self certification is required before any information on specific Venture Funding investment opportunities can be supplied to you. Click here to complete the form.
How does someone invest in Pre-IPO companies through Hoodless Brennan?
Funding is accomplished either through a Prospectus, Private Placing Memorandum (PPM) or verified presentation. All available information is passed to clients who can then discuss the proposed transaction with the department.
Once a client confirms that he wishes to proceed, a placing letter is produced that requires the client’s signature and registration details. Once all placing letters have been returned with payments, the details are then sent to the relevant company who will issue the share certificates which are then sent to the clients.
Is there a minimum deal size?
A £10,000 minimum is required for most deals.
What costs are involved in dealing in Pre-IPO investments?
All Pre-IPO deals through Hoodless Brennan are free of commissions.
As the companies are not listed what updates are available on their trading activities?
Hoodless Brennan insists that wherever possible, shareholders be updated by the companies every quarter. Pre-IPO is an investment option for experienced or professional investors which offers higher risk but with the potential of high returns and substantial tax breaks.
Sign up for our Opportunity Alert service and be the first to know about investment opportunities to suit your investment portfolio* or phone 020 7510 8696.
*Risk Warning: Qualifying for EIS tax benefits is complicated and NOT as straightforward as it may first appear. An EIS qualifying company may lose its EIS qualifying relief as a result of the company’s activities, commercial necessity or management error. The consequence of losing EIS relief means that the tax benefits of investing in the EIS scheme will be lost.
Therefore there is no guarantee that the tax advantage promoted as part of any investment will remain in existence. Additionally, the levels and basis of taxation may change. HB will not be responsible for assessing your personal tax implications of investing in these companies or any recommendations that we may make to you and you should always take independent professional tax advice.
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