Backup of deleted stuff from prospectus

Legal aspects

Objectives

Create a legal structure which protects potential upside of the existing EAH business. For instance, by creating a new legal entity, we could enable a larger equity share in the new structure to be sold without impacting the future prospects of EAH: this is a two year project and is separate from future endeavours.

Ensure the cash is available for EAH existing operations to enable the business to continue functioning as it is (thus adding value in a way that enables EAH to generate these investment opportunities).

Suggested structure - hypothesis 1

EAH launches a tax transparent United Kingdom Bare Trust SPV, as per

the method used by Odin⁠

. This ensures a tax transparent vehicle, enabling UK and Australian investors to receive any returns in their own tax jurisdiction.

Investors would then pay their funds into the SPV, receiving a portion of the equity in exchange. The remaining equity would then be assigned to EAH.

The money would then be transferred as a grant from the SPV to the existing EAH business.

Possible issues, or clarification required

Would the grant and equity being given to EAH trigger any tax events?

How would reassure investors/make it legally sound that equity would definitely flow into the SPV, rather than EAH harbouring it?

Any issues for Australian investors to be holding a UK entity?

Suggested structure - hypothesis 2

EAH simply sells equity in its existing business, with the clear intention that this is a standalone project - at the end of the two years, the intention is that this company will become dormant and a new company will be formed to enable a larger fund/next steps

Possible issues, or clarification require

What are the tax implications for UK investors in this scenario?

Return on investment - how returns will be distributed

To be confirmed, based on the above. Baseline notes as follows:

Exits will be dispersed as they are received. For instance, if we are to receive dividends from one of the businesses within the portfolio, these will be distributed to all shareholders, pro-rata. Likewise for an exit event of one of the portfolio businesses.

At the end of the two year period, we will complete one of three options:

The business unit containing the equity will continue as a ‘ghost entity’ - maintaining paperwork to ensure legal entity remains, so that distributions can continue as they are.

If the model proves extremely successful, the entity will seek to raise further funding, thus increasing its reach and expanding its operation

The business unit will be sold to a private equity fund, or similar - important note, the strict parameter to enact this is that each investor receives a minimum of 2X return on their investment. Any offers at a lower value than that will be rejected.

Protection

How we protect the shares in the startups we hold

Minority protection will be in place to ensure our shares are treated the same as the founders, this will be done in a few way, most notably by having our shares be the same share class as the founders. Additionally, to future proof this arrangement, we will include provisions which restrict the startup from altering our class without our written consent. Finally, we will ensure we have drag along rights, which means that any sale offer must be offered to us as well (ensuring our shares are included in any exit events).

This simplified description of our three prong approach ensures that we always will be treated as the same way as the founders, removing the risk of fowl play, and ensuring we partake in any exit event.

Furthermore, on a company level, we will ensure that there is no capability for us to remove any of the shares we hold from the investment vehicle - these will be locked within the registered business until an exit occurs, or the founder dissolves the business.

Additional notes for call with lawyer

What are next steps to take this to completion? For instance, letter of intent to act as hard commitment? Then what after that?

How will we ensure minority protection in the companies we are acquiring equity in?

Want to print your doc?
This is not the way.

Try clicking the ⋯ next to your doc name or using a keyboard shortcut (

CtrlP

) instead.