Reference 

General FAQ and Glossary of Terms

General FAQ

What is Enterprise Angels

Enterprise Angels allows you (as a New Zealand Wholesale Investor) to invest in innovative, early-stage NZ companies, giving you access to the same deals that experienced Angel Investors invest in. You invest alongside these Angel Investors on the same terms and at the same price per share.

Who is Enterprise Angels for?

Enterprise Angels investors include:

Angel investors looking to diversify their portfolio

Eligible Investors and HNWIs (High-Net-Worth-Individuals) who want access to a range of fully qualified early stage investments.

Investors with experience investing in startups, who are currently deeply involved in those companies and want to grow their startup portfolio without further time commitment.

Entrepreneurs who have grown their own startups and now have funds to invest, but limited time to dedicate to reviewing these opportunities.

These investors understand the importance of early stage companies being fully qualified for investment, receiving the sufficient expertise to ensure they can grow to their full potential and appreciate the value add that is provided to companies who have been working with an Angel group and have obtained backing from experienced early stage investors.

How does Enterprise Angels work?

Enterprise Angels provides information on early stage companies to registered Investors for their consideration to invest.

Offers listed on Enterprise Angels have already been through the investment process with a New Zealand Angel Group and have significant angel investment confirmed.

Registered investors are invited to invest alongside experienced Angel Group members, who have negotiated a fair valuation, and undertaken Due Diligence, aligning the interests of Angels who back deals with Enterprise Angels investors.

When you certify as a Wholesale Investor, the usual rules do not apply to offers of financial products made to you. As a result, you may not receive a complete and balanced set of information. You will also have fewer other legal protections for these investments.  Make sure you understand these consequences. 

Ask questions, read all documents carefully, and seek independent financial advice before committing yourself.

What fees do Enterprise Angels charge?

Fees for Founders

  • 6% on investment from new investors introduced by Enterprise Angels.
  • 3% on follow-on investment from existing Enterprise Angels investors.
  • Where the deal is syndicated with another angel group/broker, the fee is split 50/50.
  • If the company chooses to consolidate non-Enterprise Angels shareholders into EA Nominee Limited, there is a monthly Shareholder Management fee.  If this is in place, there is no administration fee for investors on investment and exit (see below).

Fees for Investors

  • Enterprise Angels members pay no fee on investment or exit but do pay an annual membership fee.
  • Non-member investors pay a 2% administration fee on investment and exit.

Fees for Shareholder Management Services

Details of these services can be found here

  • $150 per month for 10-20 shareholders
  • $250 per month for 21-50 shareholders
  • $350 per month for 50+ shareholders

Fees for Partners

  • Strategic & Corporate Partnerships are for organisations that wish to support the growth of young New Zealand companies and work with Enterprise Angels.  If you are interested in partnering with us, please get in touch.

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Glossary

Anti Money Laundering and Counter Financing of Terrorism (AML/CFT)

Money laundering is happening every day across the country. It’s estimated that over $1 billion a year comes from drug dealing and fraud, and can be laundered through New Zealand businesses. However, the true cost and impact is many times that figure when you factor in all the crimes that generate “dirty” money and the suffering they cause.

People who finance terrorism also use these methods to send money to violent causes and to disguise who is providing and receiving the money. While the likelihood of terrorism financing is low, the potential consequences are significant.

Phase 2 of the Anti Money Laundering and Counter Financing of Terrorism (AML/CFT) legislation came into effect on 1 July 2018.  This new legislation is aimed at keeping our international corruption-free reputation and making sure Kiwi businesses are informed and prepared to be vigilant in order to make it harder for criminals to damage our country and people.

To find out more, please check out the NZ Government’s Keep our Money Clean website.

Investors will be required to provide extra information, when they’re conducting business with us – refer here for full compliance requirements.

ADI (Angelic Drop-In) Clinics

Angelic Drop-In Clinics are a great way to engage with angels whether you have just an idea, a team and first validation, or recurring revenue and need money to scale.

We can help with Advice, Connections and Funding.

Our mentors are all Enterprise Angels members or partners with a wealth of expertise and want to help guide and help you. with Advice, Connections and help with funding.

Common Reporting Standard (CRS)

The Common Reporting Standard (CRS) is an information-gathering and reporting requirement for financial institutions in participating countries/jurisdictions, to help fight against tax evasion and protect the integrity of tax systems.

Called the Common Reporting Standard (CRS), it has been initiated by the Organisation for Economic Co-Operation and Development (OECD) under the Automatic Exchange of Information (AEOI) regime. The obligations to provide information also extend to the Foreign Account Tax Compliance Act (FATCA) as well as the CRS.

For most customers, CRS has minimal impact, however, Enterprise Angels will require you to confirm provide a number of details about you or your Investing Entity regarding your Tax Residency for CRS purposes.

Your Tax Residency will depend on where you live and your circumstances. Enterprise Angels cannot offer advice on your tax residency nor your CRS status or classification, however will require you to complete our Client Agreement including a CRS declaration. If you need further support you should visit the OECD website or contact a professional tax advisor.

Enterprise Angels will respect your data privacy. We will only disclose your information to the relevant tax authorities if we are legally required to do so.

CRS is an ongoing process. If your account information changes, we may be required to contact you to obtain additional information or documentation so that we are able to update your account classification under CRS.

EA Fund Investors will be required to provide extra information, when they’re conducting business with us – refer here for full compliance requirements.

Financial Markets Conduct Act (FMCA) Wholesale Certificate

The offers made on Enterprise Angels are governed by the Financial Markets Conduct Act 2013. The relevant sections are Schedule 1, Part 1, 3, to review, click here.

There are two types – Eligible Investor Certificate and Safe Harbour Certificate.

If you qualify as Eligible Investor under Clause 41, you will need to provide an Eligible Investor Certificate which is certified by a New Zealand FCA, Chartered Accountant or Lawyer.

If you qualify as Wholesale Investor under Clauses 37-40, you will need to provide a Safe Harbour Certificate.

It is an offence to give a certificate knowing that it is false or misleading in a material particular. The offence has a penalty of a fine not exceeding $50,000.

Investors will be required to provide extra information, when they’re conducting business with us – refer here for full compliance requirements.

Foreign Account Tax Compliance Act (FATCA)

This legislation administered by the United States government encourages better tax compliance by preventing US persons from using non-US financial organisations and foreign entities to avoid US taxation on their income and assets.

Under FATCA, New Zealand banks and financial institutions are currently required to identify and report annually on any accounts held by US Persons or foreign entities that have US Persons as beneficial owners.

Enterprise Angels cannot offer advice on whether you are considered a US Tax Resident nor your FATCA status or classification, however will require you to complete our Client Agreement including a FATCA declaration. If you need further support you should visit the IRS website or contact a professional Tax Advisor.

Enterprise Angels will respect your data privacy. We will only disclose your information to the relevant tax authorities if we are legally required to do so.

FATCA is an ongoing process. If your account information changes, we may be required to contact you to obtain additional information or documentation so that we are able to update your account classification under FATCA.

Fund Investors will be required to provide extra information, when they’re conducting business with us – refer here for full compliance requirements.

Client Agreement

Compliance is relatively straightforward for individuals, however more challenging for Legal Entities.

We would certainly prefer you make your investment in your personal name or a Company due to the nature of compliance requirements to invest via a Trust. AML/CFT compliance for a Trust requires you to provide a copy of your trust deed, proof of ID and address for each and every Trustee and Proof of the Trust’s source of Wealth and will necessitate all Trustees executing the documents outlined in item 3 below.

We strongly recommend that you talk to your lawyer and/or accountant to ascertain if your legal entity is in fact the best option for investments, especially if you have children living overseas, or are part of a blended family. There are situations where allocations from a Trust may be taxed when it is not income.

Investors will be required to provide extra information, when they’re conducting business with us – refer here for full compliance requirements.

Nominee

Most investments facilitated by Enterprise Angels are made through a nominee company.  A nominee company groups together all investments from Wholesale Investors to allow you to invest in smaller investment parcel sizes, to simplify the Share Register and minimise the administrative overhead for investors and investee companies by streamlining the communication.

The Nominee is the legal owner of the shares as a bare trustee; however the your investing entity remains the beneficial owner and retains full economic rights.

Non Enterprise Angels Members pay a 2% administration fee on all investments and exits to cover the cost of these services

Enterprise Angels Members pay an annual membership fee which covers these costs.

Nominee Deed

A Nominee Deed is an agreement between yourself and a Nominee company acknowledging the nature of the relationship. Most investments made via Enterprise Angels are made through EA Nominee Ltd, our Nominee Company.

Investors will be required to provide extra information, when they’re conducting business with us – refer here for full compliance requirements.

Trusted Referee

Acceptable trusted referees include:

  • Minister of religion
  • Justice of the peace
  • Registered medical doctor
  • Lawyer
  • Chartered accountant
  • Registered teacher
  • Kaumatua
  • Commonwealth Representative
  • An employee of the Police who holds at least the office of constable
  • Notary public
  • New Zealand Honorary consul
  • Member of Parliament
  • A person who has the legal authority to take statutory declarations or the equivalent in New Zealand

However, the trusted referee must not be:

  • related to you; for example, a trusted referee cannot be your parent, child, brother, sister, aunt, uncle or cousin
    your spouse or partner
  • a person who lives at the same address as you
  • a person involved in the transaction or business requiring the certification

Equity

If you have equity in a company, you own a part of that company. Equity capital raising essentially refers to the sale of an ownership interest to raise funds for business purposes. Most investment opportunities on the Enterprise Angels are offers of equity.

Convertible Notes

A convertible note (CN) is short-term debt that converts into equity.  In the context of Angel investing, the CN typically converts into preferred shares at the next capital raising round.  The company valuation of the CN round is typically set at a discount to the valuation of the company at the next capital raising round.

Due Diligence

Due diligence is a comprehensive appraisal of the opportunity undertaken by a team of Enterprise Angels members, to verify and fully understand the various aspects of the business and evaluate the risks and potential benefits.

Being involved in due diligence is a key benefit of being a member as this is your opportunity to have a good look “under the bonnet” of any investment offer to satisfy yourself of the risks and benefits.

A team of 4-6 members met with each other, the Founder and other key parties, and delve into the “nitty-gritty” of the offer. The areas they cover are:

  • Corporate Organisation
  • Financials
  • Real Property, Plant and Equipment of the Business
  • Intangibles of the Business
  • The Industry
  • Marketing and Distribution
  • Products and technology
  • Production
  • Other Contracts and Commitments
  • Management and Employees of the Business

Being involved in the due diligence team is an ideal way to “wet your feet” in angel investing, as it is a sure fire way to understand the offer and what it takes to choose an angel investment.

U.S. Specified Person

This is a summary of the definition of a Specified U.S. Person in the Inter Governmental Agreement (IGA). Please read the IGA for a full definition.

 

A Specified U.S. Person is a U.S. person other than the following:

  • a corporation the stock of which is regularly traded on one or more established securities markets
  • any corporation that is a member of the same expanded affiliated group as a corporation the stock of which is regularly traded (see above) on one or more established securities markets;
  • the U.S. or any wholly owned agency or instrumentality thereof;
    • any State of the U.S, any U.S. Territory, any political subdivision of any of the foregoing, or any wholly owned agency or instrumentality of any one or more of the foregoing;
    • any regulated investment company as defined in section 851 of the U.S. Internal Revenue Code or any entity registered with the U.S. Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C. 80a-64);
  1. a dealer in securities, commodities, or derivative financial instruments (including notional principal contracts, futures, forwards, and options) that is registered as such under the laws of the U.S. or any State;
  2. any one of the following as specifically defined in the U.S. Internal Revenue Code: certain organizations exempt from taxation (including certain trusts that are tax exempt or that are otherwise described in the U.S. Internal Revenue Code), certain individual retirement plans, certain banks, certain real estate investment trusts, any common trust fund, certain brokers.

A U.S. Person means:

  • a U.S. citizen or resident individual;
  • a partnership or corporation organized in the U.S. or under the U.S. law;
  • a trust if it is subject to U.S. law in terms of its administration and is controlled by a U.S. person;
  • the estate of a deceased U.S. citizen or resident.