As set out in our previous article, from 31 January 2024 HM Treasury implemented various changes to the financial promotions regime in the UK, which impact on companies planning capital raising as well as angel investors. In particular, it revised the criteria for the high net worth and self-certified sophisticated investor exemptions to bring them in line with inflation and current approaches to investing.
The Government recently announced, alongside the Spring Budget 2024, that it will now reverse some of these changes. This comes after various questions were raised about the unintended impact the prior changes would have on the tech and investment community, such as the potential exclusion of women and underrepresented groups from capital raising opportunities, as well as ecosystems outside London.
In summary, these new changes to the criteria mean:
- The threshold for the annual income requirement for high-net-worth individual investor has been lowered from £170,000 back to £100,000 and the net assets condition has been reduced from £430,000 or more back to £250,000 or more.
- For self-certified sophisticated investors, the turnover requirement for a director's company has been reduced from £1,600,000 back to £1,000,000. Additionally, a provision has been re-inserted so that an individual can be considered a self-certified sophisticated investor if they have invested in an unlisted company at least twice in the two years preceding the date on which their investor statement has been completed and signed and provided they state how many such investments they have made in that time.
The amendments have been made pursuant to the Financial Services and Markets Act 2000 (Financial Promotion) (Amendment and Transitional Provision) Order 2024 (SI 2024/301) (the "Order"), which comes into force on 27 March 2024. The Order amends the criteria to be eligible for the exemptions (as noted above), whilst still maintaining the updated format of the investor statements that were introduced as of 31 January 2024. The Order also provides that investor statements that comply with the previous order will remain valid until and including 30 January 2025.
For guidance on how theses reversals apply to fundraisings, including the updated investment statements, please do get in touch with us to discuss further.