Changes to the thresholds in the high-net-worth individual and self-certified sophisticated investor exemptions set out in the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 and the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) Order 2001 came into force at the end of January (the January amendments).
The Government has now made new regulations to reverse the January amendments to the original position. In summary:
- For the high-net-worth individual exemption, requisite income will be reduced to £100,000 (from £170,000) and requisite net assets will be reduced to £250,000 (from £430,000) in the last financial year;
- For the self-certified investor exemption, the option relating to having made two or more investments in an unlisted company in the last two years has been reinstated and for the director of a company option the turnover required has been reduced back down to £1 million (from £1.6 million).
These changes will come into force from 27 March 2024, however investor statements including the higher thresholds (resulting from the January amendments) will be valid until 30 January 2025.
There has been much commentary around the January amendments and the unintended consequences around introducing these. There have been concerns voiced that the changes would negatively impact female and minority investors (due in part to existing pay gaps), in turn leading to an increased lack of diversity in the startup investor environment. Further, as well used exemptions for smaller unlisted exemptions, the threshold changes may have made it more difficult for start-ups to fundraise. No doubt this “U-turn” will be welcomed for unlisted companies somewhat reliant on “friends and family” fundraising rounds.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at March 2024.