Frequently asked legal questions about Neufund
Neufund’s legal structure might seem quite complex at first, but it’s really quite easy. We have compiled a list of the most frequently asked legal questions from our community. Can’t find your question? Let us know on Telegram.
Do I have to be an accredited / qualified investor to invest in an Equity Token Offering?
No, you don’t have to be an accredited / qualified investor. Retail investors can also participate in the Equity Token Offerings (ETO) offered through our platform. However, to participate in the ongoing offering of Fifth Force GmbH there is a minimum ticket size threshold set at 100k EUR.
How are retail investors able to participate in public offerings on the Neufund platform?
When companies conduct unlimited public offerings (e.g., without required minimum ticket size or investor status) through Neufund they are required to file an Investment Prospectus (Vermögensanlagen-Verkaufsprospekt) with the German Federal Financial Supervisory Authority (BaFin). Only once an Investment Prospectus is approved by BaFin, can an unlimited public offering take place. It should be noted that the Fifth Force ETO is limited to minimum ticket sizes of 100k EUR so that no prospectus is required.
What is an Investment Memorandum?
An Investment Memorandum informs investors about the terms and conditions of an investment offer. It includes comprehensive information about the company, product, and the offer itself. The document also informs all investors about the investment, including risks. An Investment Memorandum, unlike a Prospectus, does not need to be submitted to BaFin.
Why is there an identity verification process to invest through Neufund?
In order to take part in the investment opportunities on the platform, you must first complete our verification process, Know Your Customer (KYC). KYC is a process in which we verify our client’s legal identity. Neufund verifies the identity of every investor and company on the platform as part of our policy and in accordance with the principles of Anti-Money Laundering (AML) legislation. Whether you are an individual or representing a business entity, you will need to pass our verification process in order to invest or fundraise on the platform.
The verification process is designed to enable a fully legal and regulated investment process for both our investors and the companies on the platform. This process is crucial in order to keep our investors protected and to assess and monitor customer risk.
What is the FTH token?
An FTH token represents an equity-like interest in Fifth Force GmbH which entitles the equity tokenholder to shareholder rights (e.g dividends, voting, etc) in the company. . Depending on the jurisdiction, FTH might be qualified differently.
What happens if the Ethereum blockchain shuts down, Neufund closes, or I lose my agreement?
Your rights as an equity token holder are protected both on-chain with the smart contracts and also off-chain with the Investment & Shareholders Agreement that is physically signed on paper. Since this legal structure is mirrored in the Ethereum smart contracts, your rights are actually protected twice –off-chain law is a backup for Blockchain failure. If for whatever reason Neufund ceases to exist, you can always refer to the Ethereum blockchain or the signed agreements.
Neufund functions as an intermediary and we are not any party to the agreements, which establish a direct relationship between the investors and issuers.
What’s the Nominee?
It is a bankruptcy remote special purpose vehicle (SPV), set up by the company conducting the ETO to bridge the worlds of on-chain tokens and off-chain equity. The Nominee represents token holders as a single entry in the cap table of the company. It is contractually bound to execute the will of the Token Holders expressed in the smart contracts and performs a purely bureaucratic function. The Nominee signs the Investment and Shareholder’s Agreement with the company issuing the tokens.
What is the Investment and Shareholder’s Agreement (ISHA)?
The Investment and Shareholder’s Agreement is the contract that is executed off-chain between the company conducting the ETO and the Nominee. On the basis of this agreement, funds raised through a successful ETO are transferred to the Issuer and in exchange, the Nominee becomes a shareholder of the Company. Issuers are responsible for ensuring that the legal and procedural requirements for the valid execution of the ISHA and the effective accession of the Nominee as a shareholder are met. Funds will only be released to the Issuer once a validly executed ISHA is uploaded to the Issuer’s page on the Neufund Platform.
What is the Token Holder Agreement?
The Token Holder Agreement makes sure that the Nominee executes the will of the equity token holders. It is signed between the Nominee and the equity token holders. Read more about the legal setup here →
Do companies need to register their capital increase in the Commercial Registry?
Yes. The registration happens after a successful ETO. Token holders are represented by the Nominee, which represents token holders as a single entry in the cap table of the company.
Who is liable for the issuance of tokens?
The company conducting the ETO is exclusively liable for the issuance of the tokens.
What is a Reservation and Acquisition Agreement?
It is an agreement signed between the Nominee, the Issuer and the equity token holder, to ensure transfer of equity rights to the token holder, and collected funds to the issuer. Read more about the legal setup here →
What about the safety of tokens I bought on Neufund?
Neufund does not have access to Equity Tokens bought through Neufund by investors. As an investor, you are responsible for the safety of your assets stored on your wallet and you are free to do with them what you choose. The record of the assets is kept on public ledger.
Join our telegram chat if you have questions or want to meet the Neufund community and team. You can also submit a question here. Or visit our subreddit to join the conversation. Our Freshdesk is a great resource to learn the Neufund basics.
LEGAL DISCLAIMER; Please note that this is for informational purposes only. Fifth Force GmbH as operator of the Neufund Platform does not provide any legal, tax or advisory services. In using the services offered on the Neufund Platform, prospective users will need to conduct an independent assessment.
