What are the costs for setting up and operating SPV's with Odin?
1.
We charge a per-deal fee of between $1,500 and $7,000, depending on the size of the deal.
2.
Typically, either the dealmaker (fund manager) will cover the costs of structuring the deal themselves, or else pass these costs on to investors pro-rata, based on their capital contribution to the deal.
3.
Investors also pay 5% carried interest to Odin on syndicates that they discover via the Odin platform, rather than paying this carry directly to the syndicate leads.
4.
If you wish to trade sell your shares in an SPV to another investor, Odin charges a 1% platform fee for handling the transaction.
Who pays the fees? Investors, me or the investee company?
Typically the fee is covered by the syndicate lead or charged pro-rata to investors.
Can I split carry between different people?
Yes!
Can I charge different amounts of carry to different people?
Yes!
What legal structure do you use?
We use a United Kingdom Bare Trust to administer your investments.
This means a non-operating subsidiary of Join Odin Limited holds your shares in custody. You, as investor, sign some terms and conditions with Odin and a declaration of trust with this non-operating subsidiary. However, you remain the beneficial owner of the underlying assets. This means that this is not, strictly speaking, a fund vehicle.
It is completely tax transparent, and in a liquidity event you, as beneficial owner of the shares, pay tax wherever you are tax resident. You do not have any UK tax liability.
The specific terms of investments in a deal, including things like carried interest payable to the lead, are outlined in a side-agreement for each deal. It also specifies governance and other rights.
Is this legal structure tax-transparent?
Yes. Investors anywhere can invest in companies anywhere. Any returns will be subject to taxation in the jurisdiction where the investor is domiciled.
Rather than using the Odin Nominee, can I set up my own nominee?
Yes, this is possible at additional cost
My investors are UK tax-resident and are investing in an S/EIS deal - can they claim with this structure?
Yes. The investee is responsible for issuing the relevant document to the underlying investors in order for them to claim their tax relief. This is a straightforward process.
What about voting / investor consent?
Voting / investor consent may be carried out by each individual investor, or the group of investors may agree to proxy this activity to a single investor in the syndicate (simpler). Typically it is proxied to the syndicate lead.
And pre-emption?
In general, all the investors in the syndicate are entitled to exercise their pre-emption rights, and can do so directly or via another SPV structure in future rounds.
You can choose to control pre-emption and information rights only if you are a regulated fund manager.
Can my investors sell their shares post-close?
Yes, if they have a buyer. Typically they’ll need to get board consent and offer pre-emption to existing shareholders, who have to waive their rights to buy. At this point, they can sell, and the new investor will take their place in the vehicle. We handle the legals and charge a 1% fee for processing the transaction.
Who is the signatory on the startup's equity documents?
The signatory is Odin Nominees Limited, under the instruction of the syndicate.
How does reporting work?
Reporting to underlying investors is at the discretion of the investee and is typically specified as monthly or quarterly in the term sheet. The syndicate lead may choose to manage this activity as representative of the group of investors, or the information can be shared with the underlying investors directly by the investee company.
What about distributions?
Distributions are paid to Odin Nominees Limited, who passes the capital directly to the investors in the syndicate in accordance with any agreements the syndicate has in place.
Can an investor in the SPV sell their shares via a secondary transaction?
As standard, it is possible for investors to trade in and out of their positions in the SPV. We charge a 1% transaction fee for managing this process.
How does this work from a regulatory perspective? Do investors need to be accredited / sophisticated?
In short, YES. According to FCA and SEC regulations, you have to be a sophisticated investor to invest in alternative investments such as private deals, venture capital, angel syndicates, etc.
An accredited / sophisticated investor has a strong understanding of the risks associated with alternative investments gained through experience in the sector and/or exceeds a specific net worth or income threshold depending on the regulation of the country they are resident of. If your investors do not meet these requirements, you may be legally liable.