When am I ready to launch my EIS fund? Some practical advice on steps to take before engaging advisers. Part 3: Who to call?

When am I ready to launch my EIS fund? Some practical advice on steps to take before engaging advisers.

10th August 2017



You want to launch an EIS fund? Over the coming weeks, we at Mainspring will be publishing a series of short articles to walk you through the process.

PART 3: WHO TO CALL?

Last time, we looked at some of the technical details that require thorough investigation prior to launching a fund and also touched on the crucial area of agreeing a suitable cost base, setting the fees and the amount to raise to supply the required working capital for the team.

You have confirmed where you will invest, how you will source deals and who might invest in the fund, as well as identified the fund size and fee structure that allows you to operate the business in an economic manner, you are almost ready to start marketing your fund, but not before incurring your first costs.

Next up you need to engage advisers to ensure you have the correct regulatory permissions, legal structures and materials to go out and raise money.

First of all, if you do not already have a regulated management company, you have a choice; get regulated or engage with a regulated ‘umbrella’. Which you opt for is a matter of speed vs. cost, and your appetite to run a regulated business yourself vs. whether you’d prefer to work with more experienced professionals. The simplest and fastest option (although at cost) will be to engage the services of a regulatory umbrella which will provide the regulatory infrastructure to allow you to market your fund and focus your attention on managing investments.

You will also need to engage a custodian (Mainspring provides this service). In an EIS context, the custodian has the safeguarding and administering permissions which allow it to hold client monies and assets as well as managing the administration and reporting for the fund. In an EIS fund there is no separate incorporated vehicle, it is the custodian which actually holds the cash and the client assets – it is therefore vital to work with a custodian that is experienced and delivers high-quality services.

The legal documents also need to be drafted and you should work with a lawyer that has experience with setting up an EIS fund. The key documents are the investment management agreement and the custody agreement, which need to be tightly integrated, and the application form, which investors will use to invest in the fund.

Although there is no fund vehicle to audit (so you will not need to engage an auditor for the fund), you will probably need to engage a tax adviser, to make sure that the vehicle works from a tax perspective.

Technically, with all this in place, you should now be in a position to start approaching investors.

Remember:

  1.  You will need to be regulated by the FCA or engage the services of a regulatory umbrella
  2.  You will need to appoint a custodian – the custodian carries out the key administrative and reporting functions and also holds client monies and client assets, and holds the records of the transactions, investors and investments
  3.  You will need a specialist law firm to draft all the requisite documentation

Of course, you may wish to engage with service providers and advisers that specialise in preparing marketing materials for the fund and introducing investors. That is our topic for next time.

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