Mindflood or Patchworks, a tech company based out of NI, raised money on Crowdcube in 2015. Shareholders have heard nothing since 2016. Now in June 2019, they are told that the company is closing and they will receive some small change - donatable to charity.
In 2016, the company issued 139k C Prefs to Techstart NI and one other much smaller investor. These shares had a catch - in the event of liquidation the holders were first in the queue after creditors to be paid out. So ahead of the Crowd. To confirm this the company passed a new set of Articles - only voted on by A SHs. Most of the Crowdcube gang were Bs.
So as the paperwork states, the sale of the company's IP to an undisclosed buyer for £250k has enabled the £136k paid by Techstart to be repaid in full. Phew for them. Was there some personal guarantee?
What's left has been calculated by Mr Heinz to give the Crowd 5p per share. This is after he has allowed for £30k to be spent on the DIY liquidation. No mention as to who gets this is obvious.
One positive here is that there are no creditors left unpaid. And of course, as Heinz is keen to point out, Save the Children can benefit if you dont want the small change causing a hole in your pocket.
Another interesting point is that the DIY calculation includes not only the payment in full of the C prefs but they are also included in an extra £7k share of the final pot - despite the fact that the Articles state they are not entitled to a dividend. We think that might be wrong - not that it makes any real difference.
The company made steady losses until all the investment was gone.
What a mess after 4 years. Just shows that it is worth knowing your way around share issues, share rights and Articles of Association if you dont want a surprise email pinging your inbox.
Seedrs for sure have not mentioned this preferred payment on liquidation on at least two investments I have. If they had disclosed I would not have invested. Interesting one I have where it was not disclosed has another North West of England Govt Agency that had first dibs. The North West Agency subsequently sold their prefs in a deal that actually gave the start up a valuation of over 3BN . The said company then tried a raise on Crowdcube for about 1m and failed to get funded. Seedrs investors were misinformed with fundamental facts withheld on the pitch
ReplyDelete