Q: Can I raise money from private investors for my company?
Aug 17 2005
Answered by: Clive Lewis Ask a question
There are a lot of rules and you don’t want to fall foul of the Financial Services Act. If you produce something called a POS prospectus, this is an investment advertisement and it can be circulated widely to private investors to see if they would like to invest in your company. However, a POS prospectus can prove expensive to produce. You will need to use solicitors and accountants to get all the legal wording and required information in place. And they can come expensive.
If you want to circulate a private document to just a few friends, you could use an information memorandum. But this can only go to a few people (solicitors disagree on the number) and you need to be confident that the friends are sophisticated and understand the risks of investing in a private company. Again, I am sure that money spent getting your solicitor’s advice is well spent.
Business angels or partners can also be sought and will cause you less worries, although the information you give obviously must be correct.
Vist our sister website GrowthBusiness.co.uk cover venture capital finance and private equity funding in great detail.
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