Crowdcube request to change Investor Nominee Terms


(Josh Lindl) #248

Monzo have a legal team. Tom is a first class oxford law grad. Would like to see a bit more of a statement from Monzo but as others have said above, seems they’re are keeping quiet for a reason and possibly in our interests. In my mind this is nothing more than an attempted grab from CC - but as others have said, would like to see them, in plain english and in a legal text, show us otherwise


(Josh Lindl) #249

It may be in their interests as their options will be much more lucrative than their crowdfund holding so they come at this from a slightly different angle


(Jon Crozier) #250

Got to say I’m concerned about this. I am still yet to vote but after reading this thread it does appear not to be in my interest to vote yes.

I understand that Monzo may not be able to advise us on what to do here but I feel like we are being mislead by Crowdcube into voting for changes that they say are for our benefit. I just don’t see what those benefits are? It all seems to benefit Crowdcube- the example given about not having to get us to vote on changes to a grammatical error seems to be a fairly weak one to me. I may be wrong?

It was a big deal to invest in Monzo. I did so because I have trust in Monzo and connect with what they’re building. I do feel concerned that my investment could be negatively affected in the future by these proposed changes by a Crowdcube.

Lastly, I’m assuming this isn’t actually possible but is there a way for us to take actual ownership of our shares and move away from Crowdcube if we so wish? Is that even possible and would it even be a good idea if so?

Would love a little more input from Monzo if possible.


#251

This example was probably used because it sounds harmless. I think the new terms will pass. Perhaps we can all reconvene if Crowdcube oversteps, maybe when they realise alienating investors, or treating them as dumb money is a bad growth strategy.

Crowdcube have spent the last few years bringing up how great Monzo’s funding rounds have been, how those rounds are evidence of their vision, so now seeing them treat Monzo investors like this is extremely poor.

I say this all as someone who wanted to see Crowdcube succeed, and someone who shared pitches I found interesting, but now I just cannot recommend Crowdcube in it’s current form. Sure they need to find a better business model, but there are ways to go about it, and they have picked all the wrong ones in my opinion.


(Neil) #252

Well. I’ve read and reread Monzo / Crowdcube comms. and everything posted here, and I am still unable to properly understand the motivations/ramifications. And that in itself is good enough to vote no. So that’s what I’ve done.

I don’t know where Monzo really sit in all of this (because they haven’t said), but I’m minded to trust them. Crowdcube - on the other hand - I have already stopped using for other reasons. It a shame that the route to Monzo shares is via Crowdcube. I’ve already had to recommend friends of mine avoid investing in Monzo because of that.


(Jon Crozier) #253

I completely agree and that’s why I feel like we’re being misled.

Not something I’d expect Monzo to be a part of.


(Lee) #254

Hi All

How can Crowdcube have our best interests in mind when they clearly have there own conflicting financial interests to think about when discussing changes with Monzo?

If they are going to start charging us fees then some of this money should be used to contract external legal representation to review any proposed changes on behalf of the crowdfunders collectively with our best interests in mind.

Lee


(Hannah Rowe) #255

Hello,

Unfortunately, votes are not able to be changed as they are irrevocable. Our voting system is set up to mirror the written resolution procedure for a company (as 90% of our votes are on a written resolution). Per the Companies Act, votes on a written resolution are irrevocable and so this element is mirrored into our vote system. We apologise if this is unclear, and we will ensure we make this clearer for any vote in the future.


(Martin B) #256

Well, sorry Crowdcube. A clear No from me. It never makes sense to agree to new terms that seem to only benefit the “other” side.


(Hannah Rowe) #257

Hello @saf

To address your questions in turn:

Are the votes recorded and counted by Crowdcube? Or is this outsourced?
Votes are recorded and counted by Crowdcube through our dedicated nominee software. We’ve developed our voting processes in accordance with the FCA rules and guidelines regarding the safeguarding of assets.

If you wanted uniformity of terms between the last round, and previous investors then why not just move the last round investors to the old terms?
There are a number of reasons, but in short:

  1. the new Nominee Terms make the relative rights/obligations of the parties clearer and give crowd investors more protection. We explained this in more detail in the email we sent to relevant investors and my earlier post here in the community forum.

  2. Monzo doesn’t have any current plans to do another crowdfunding round, but if they do one in the future, then they’d be likely to use the new Nominee Terms.

  3. the number of investors in Monzo’s latest crowdfunding round, who have accepted the new Nominee Terms, is much larger than the total number of crowd investors in the previous three rounds.

Can you provide better examples of how these changes benefit the investors?
One specific example would be in the event of a proposed share sale of Monzo, where ownership of the crowd shares would be transferred from crowd investors to a buyer. In general, this sale can take the form of either a “drag sale” or a “non-drag sale”.

In a “drag sale”, the majority shareholders of the Company decide to sell their shares and “force” the remaining minority to sell their shares to the potential buyer at the same price so that the buyer can buy the entire company. In this scenario, Monzo would notify the Crowdcube Nominee of the decision of its majority shareholders and the Crowdcube Nominee (who holds the legal title to the crowd shares) would sign the share purchase agreement and sell the crowd shares. The crowd investors (who beneficially own the crowd shares) wouldn’t have a right to refuse transfer in this situation.

Drag sales are used, but aren’t as common as non-drag sales (see below). Some buyers and companies are very uncomfortable with a drag sale because it can seem like they’re forcing someone to sell their assets and if they don’t, someone else can sell it for them.

In a “non-drag sale”, the prospective buyer (or the company) doesn’t want to use the drag and instead prefers to have shareholders actively sign the transfer document. In this case, under the nominee terms we used for the crowdfunding rounds completed in 2016 and 2017, Crowdcube would have to poll the crowd investors and would then sell or not sell all of its shareholding based on their instructions (this would be a majority decision weighted by number of shares).

There are limited circumstances where using this polling mechanism in the context of a non-drag share sale may create complexity and even preclude the crowd investors from realising the full benefit of the sale. One example would be if a sale was presented where the majority of other shareholders of Monzo had already agreed the deal at an attractive sale price, but there was some critical timing constraint or sensitivity which meant that the buyer wouldn’t agree to Crowdcube polling the crowd investors. In these limited circumstances, if the Crowdcube Nominee had to reach out to thousands of crowd investors to get their consent to complete the transaction, then it would be very unlikely that the transaction would go through. The New Nominee Terms aim to solve this problem by giving Crowdcube Nominee the right to sell crowd shares on behalf of the crowd investors with no poll when the offer is clearly in the best interests of the crowd investors and polling them would be inefficient or practically impossible. The purpose of this provision is exactly to try and protect crowd investors from missing out on an exit opportunity in those highly limited circumstances.

To reiterate, this is just an example and Monzo is not planning any sale.

In the event Monzo would like to complete an action that doesn’t impact investors, such as a non material change to the Articles of Association, the new nominee terms would allow us to pass this resolution on behalf of investors. This would let Monzo make the required quickly, without requiring investors to vote on something that ultimately wouldn’t impact their shareholding. This would save investors and the company time and unnecessary admin.

To reiterate, Crowdube will make a decision without polling investors only when the transfer is clearly in the best interests of the crowd investors as a whole. If Crowdcube isn’t sure and think investors should make a collective decision, Crowdcube will still poll crowd investors.

An additional example would be that under the New Nominee Terms, the crowd investor would be appointing Crowdcube Capital Limited to act as Investor Representative. As a regulated entity, Crowdcube Capital Limited has to make sure it complies with the Financial Conduct Authority’s rules for holding assets on behalf of third parties. Having a contract with a regulated entity offers investors greater protection.

I hope that helps but if you’d like any further information on this particular point, please email me directly.

The voting page mentions better protection. Are you suggesting the nominee representing the shares currently isn’t a regulated entity?
The nominee company is not regulated in itself, although it is instructed by Crowdcube Capital, a regulated entity with the FCA permission to operate a nominee company. Any instructions to the nominee are, therefore, in accordance with the FCA rules. By changing the terms to be direct with Crowdcube Capital, it makes it clearer which entity is instructing which, and provides an easier route should investors wish to complain about the actions of the nominee.


(Hannah Rowe) #258

Hello @Investor_No1,

Crowdcube Nominees Limited is not able to "go bust", as it is only an asset holding entity. In the event that the wider Crowdcube business enters administration or liquidation, there is a resolution plan in place in line with the FCA CASS guidelines. Any shares held by the nominee would not be part of that liquidation, and either the shareholding would be transferred to each individual (dissolving the nominee), or transferred to a third-party regulated nominee company to continue holding the shares on trust.


(Hannah Rowe) #259

Hello @danbeddows,

This provision was already included in the Declaration of Trust (the old nominee terms) since 2017.

In circumstances where there is fraud, negligence or breach on the part of Crowdcube, we cannot use the assets held on behalf of Monzo investors to cover any losses. In other circumstances, should the need arise, Crowdcube can use the value of the shares held in trust to cover any losses. For example, if Crowdcube were directed by investors to act or vote in a certain way and, as a result of this action, other shareholders took action against the Nominee, then Crowdcube could use the assets of the investors who have shares held by the nominee to defend or settle that case.

I hope that answers your question. If you have any further queries, please don’t hesitate to get in touch.


#260

Really disappointed at CrowdCube for not accurately reflecting the changes, let alone being transparent as to how the vote affects them as a company.

The wording & use of different font sizes in what they sent out certainly felt like propaganda - to the maximum extent they felt they could get away with - towards encouraging people to vote yes.

While such tricks would of been evident to some, it wouldn’t be surprising if a large proportion of people that voted have been duped.

Whether that constitutes a majority, inclusive of those that didn’t vote, remains to be seen…


(Christopher Elliott) #261

Never got a email from them


(Stuart) #262

@Hannah_Crowdcube Maybe I’m misunderstanding, but this just sounds like a way for a “non-drag sale” to be turned into a “drag sale” without calling it that.

I don’t really care how ineffecient the process off polling is. If my shares are to be sold I want to have a say in it.


#263

I have actually changed my mind after reading hanna’s replies. I did say I would be voting no but decided to hold off at the last minute to see what else was explained.

I will now be voting yes

Correct me if I am wrong, but if more people are on the new terms than the old it seems that we are outnumbered anyway if a drag sale happens.


(Kolok) #264

A drag sale is one possible situation that being on the new terms is better , note possible, what about all the disadvantages and all the power and trust you’re putting in a crowdcube, some people have invested over £1k and trusting that with an unregulated nominee company.


(chrisdalziel) #265

You’re probably right that the number of shareholders on the new terms are greater. I’m not sure if the value of shares managed under the new terms are greater though.


#266

I am holding off again _ I understand that people don’t seem to like crowdcube but it does seem to be clouding the issue here as negativity and suspicions are taking over too much, just my opinion


#267

One last point, not sure if it is relevant but if Monzo got in trouble and needed to sell fast to avoid complete melt down I would be happy for the nominee to act on my behalf rather than see monzo collapse