The government has reversed the eligibility criteria to qualify as a high-net-worth and sophisticated investor.
It said in the Budget paper: “The government will legislate to reinstate the previous eligibility criteria to qualify as a high net worth or sophisticated investor, and will also carry out further work to review the scope of the exemptions.”
As part of the Autumn Statement the government made changes to financial promotion exemptions in relation to HNW individuals following a consultation.
Exemptions were originally introduced in 2001 to enable SME businesses to raise finance from HNW individuals and sophisticated private investors without the cost of having to comply with the financial promotions regime.
The changes made last year to HNW eligibility criteria included:
- Increasing the financial thresholds to be eligible for the HNW individual exemption to income of at least £170,000 in the last financial year or net assets of at least £430,000 throughout the last financial year.
- Requiring businesses to provide details of themselves in any communications made using the exemptions.
- Updating the HNW individual statements.
- Applying these changes to the equivalent exemptions for promotion of collective investment schemes.
Michael Moore, BVCA chief executive said he was pleased to see the government reverse these changes.
“The government has listened to industry concerns about the impact of the changes on start-ups, early-stage companies and venture capital funds, expressed by the BVCA, the Enterprise Investment Scheme Association and the UK Business Angels Association.”
Sam McArthur, partner at Praetura Investments said while the changes were encouraging there was still “work to be done”.
He said: “British businesses are at a financing bottleneck, with last week’s figures on the number of SME accounts closed by banks over the last year proving many are still struggling to access the capital they need to grow.
“It’s encouraging to see the chancellor reversing changes made in his Autumn Statement to the qualifying criteria for high-net-worth individuals and self-certified sophisticated investor exemption.
"These groups are dynamic backers of early-stage, high potential businesses, and it’s crucial they’re empowered to support our small business ecosystem.
“However, there’s still work to be done to address inequality of funding between the North and the South. Our own research revealed there’s an annual funding gap of £9bn for Northern based small businesses seeking funding for growth. More measures and initiatives to lower the barriers for firms raising capital will only support economic growth.”
alina.khan@ft.com
