IN409 - CROWD FUNDING - Professional Trustee Services for Commercial UK Fundraising and Borrowing Arrangements
Alternative project finance continues to remain a popular route to commercial fundraising, particularly in the UK commercial property development industry. Businesses continue to diversify their funding arrangements by considering alternative finance structures. These structures can take a number of different forms, with the most common being equity and debt based alternative investments, with UK resident and domiciled, sophisticated high net worth investors being the main target groups.
How Can Dixcart Assist with the Organisation of these Arrangements?
Dixcart establishes workable structures which are compliant with the UK financial services legislation and Financial Conduct Authority (“FCA”) guidelines, to enable clients to raise the funds they require. Funds may be raised directly from high net worth and/or sophisticated investors or via Self Invested Personal Pensions (“SIPPs”) and Small Self Administered Schemes (“SSAS”).
Dixcart works with specialist UK corporate and financial service lawyers who provide advice as to how the alternative investment opportunity should be structured to be compliant with the complex UK financial services legislation and FCA guidelines. Dixcart also works with Guernsey based corporate and financial services lawyers who can advise on the equivalent financial service rules in Guernsey and the guidelines provided by the Guernsey Financial Services Commission.
How Does a Dixcart Security Trust Arrangement Work?
The Dixcart Security Trust Arrangement is usually put in place by the fundraising party, that is the company seeking to raise funds (the “Investment Company”), and is effected legally by way of a Security Trust Deed. The Security Trust Deed creates a trust that is used to hold security over the Investment Company’s assets. This trust is secured in favour of the Security Trustee (Dixcart) for the benefit of the Investment Company’s Investors (whether they are loan note holders or shareholders in the Investment Company).
As Security Trustee, Dixcart will also enter into a Legal Charge or Debenture (the “Security Document”) with the Investment Company, through which the Investment Company will charge its assets in favour of Dixcart to secure repayment of the investment.
Dixcart will be empowered to act on behalf of all of the investors in enforcing the terms of the Security Document should they be breached by the Investment Company, for example, should investment returns not be fulfilled in accordance with the terms of the investment.
The parties to the Security Trust Deed are:
- The Investment Company; and
- The Security Trustee
What are the Benefits of using Dixcart as the Security Trustee?
- Use of a Security Trust Arrangement can be a less expensive on-going alternative to using a standard fundraising model.
- A Security Trust Arrangement offers flexibility in terms of the potential to add extra levels of fundraising through the issue of additional equity or debt instruments.
- Administrative Convenience for Investors and the Investment Company
- Instead of having multiple security documents with various investors, the Security Trust arrangement means that the Investment Company only needs to enter into the Security Trust Deed and Security Document with Dixcart (as Security Trustee). Should the Investment Company breach the terms of the Security Trust Deed or Security Document, Dixcart would enforce these documents on behalf of all of the Investors, and the Investment Company would therefore not need to field multiple claims from a number of Investors.
- The handling of all the claims would be dealt with centrally by Dixcart, which may also be attractive to Investors.
- Dixcart already has a number of active arrangements in place in the £5m to £15m fundraising range.
- The Dixcart role of security trustee includes: due diligence audits, coordinating banking operations, liaising with architects and RICS (Royal Institution of Chartered Surveyors) professionals to monitor project development, UK site visits, review of reports detailing the schedule of stage payments and arranging payment release against professional reports.
- The Dixcart Group was established in 1972 and has in excess of 40 years' experience acting as a professional, independent trustee on a wide range of corporate and private matters.
- Dixcart Trust Corporation Limited is a licensed fiduciary and is regulated by the Guernsey Financial Services Commission.
If you require additional information regarding Dixcart acting as a security trustee, please contact Bruce Watterson at Dixcart Trust Corporation Limited, the Dixcart company in Guernsey. Alternatively please speak to your usual Dixcart contact.