From Tom Logan: PwC
Sorry for the delay.
In brief, we recommend that the Streamline communication to employees should provide a brief explanation of the share matching platform and how it works, as well as including the following wording:
Pursuant to the terms of the Streamline Business Group Limited (Streamline or the Company) shareholders’ agreement dated [insert date] (Shareholders’ Agreement), Streamline [(or a related body corporate of Streamline)] proposes to operate a facility for the purposes of the Trading Window (as defined in the Shareholders’ Agreement) matching persons who wish to acquire Streamline ordinary shares (Shares) with persons who wish to dispose of Shares (whether at a specified price or otherwise) (Facility). Capitalised terms used but not defined in this document, shall have the meaning given to them in the Shareholders’ Agreement.
The Facility is a facility of the kind described in section 309(2)(b) of the Financial Markets Conduct Act 2013 (FMCA). Accordingly, as the offer of Shares for sale is being made through the Facility, it does not require disclosure under Part 3 of the FMCA.
New Zealand law normally requires people who offer financial products to give information to investors before they invest. This information is designed to help investors to make an informed decision.
The usual rules do not apply to this offer because it is made through the Facility. As a result, you may not be given all the information usually required. You will also have fewer other legal protections for this investment.
The Shares will give you a stake in the ownership of Streamline. You may receive a return if dividends are paid. If Streamline runs into financial difficulties and is wound up, you will be paid only after all creditors [and holders of preference shares] have been paid. You may lose some or all of your investment.
Ask questions, read all documents carefully, and seek independent financial advice before committing yourself.
Deed of Accession
A person may not be registered as the holder of Shares (whether those Shares have been acquired upon an issue or disposal or otherwise) unless the person is a party to the Shareholders’ Agreement (as it may be amended), or has entered into a Deed of Accession
Participation by Streamline
Streamline intends to participate in the Trading Window to purchase up to [insert number] Shares which it intends to re-distribute (by way of issue) to Employees in accordance with its obligations under the Streamline [employee share scheme].
Accordingly, any shareholder who wishes to Dispose of Shares in a Trading Window, by giving a Trading Window Offer Notice, will be deemed to have given a Disposal Notice in accordance with clause 10.2 of the Shareholders’ Agreement.
We also set out below a summary of the FMCA provisions as they apply to the Trading Window offers, for your reference.
We would be happy to discuss any of the above/below if you have any questions.
Financial Market Conduct Act 2013 (FMCA)
Disclosure under Part 3 not required
The FMCA provides that an offer of shares for sale requires disclosure and preparation of a product disclosure statement if the issuer (Streamline) advises, encourages, or knowingly assists the offeror in connection with the offer of the shares or if Streamline is itself the offeror (Disclosure Requirement).
However, there are certain exceptions to this including if the offer of shares for sale is made through a facility of the kind described in section 309(2)(b) of the FMCA. This means that, to the extent that the facility constitutes Streamline (or a related body corporate of Streamline) matching persons who wish to acquire Streamline shares with persons who wish to dispose of Streamline shares (whether at a specified price or otherwise), then the Disclosure Requirement does not apply.
Although disclosure is not required under Part 3 of the FMCA because Streamline is providing a matching facility of the kind mentioned above, the fair dealing provisions of the FMCA will still apply to such offers. The fair dealing provisions set out the core standards of behaviour that those operating in the financial markets must comply with and broadly prohibit:
- misleading or deceptive conduct, including conduct which is likely to mislead or deceive;
- false, misleading or unsubstantiated representations; and
- offers of financial products in the course of unsolicited meetings.
Partner | PwC Legal
Office: +64 9 355 8096 | Mobile: +64 27 531 9282
PwC Legal New ZealandPwC Tower, 15 Customs Street West, Auckland 1010
Private Bag 92162, Auckland 1142
On Fri, 14 Oct 2022 at 10:20, Craig Pellett <firstname.lastname@example.org> wrote:
Thanks again for your time yesterday.
I thought I should start by restating the objectives of the trading window:
- Primarily for the business, its shareholders and staff, it’s another small step in the direction we are heading and confirmation that the board is supporting that direction. We see these small steps as being more beneficial than some big bang liquidity event. It gives time for everyone to adjust to a more disciplined and compliance related environment.
- We are not expecting a huge about of trading, but it will give us visibility of who wants to sell and who in the NZ team wants to buy which will be helpful in our future thinking.
- It allows staff to participate as shareholders without the complexities of a formal staff share scheme and the dilution to existing shareholders.
- It delivers on the boards commitment to create a level of liquidity for shareholders, albeit still very limited. It’s the best we can do for now.
Following yesterday’s session, I hope we can reduce the paperwork required. It had been anticipated that this would be a somewhat more frictionless experience than what is currently tabled.
Tom if you can provide us with the “legal messaging “ that our communications around this event must contain.
Keegan you are going to have your team review the documentation to see what is really necessary and how we might be able to trim this and make it more “frictionless”.
I am continuing with the preparation of the material we will need based on the Healthy Co Limited example. The next board meeting is on the 27th October and we will finalise content and items then.
Clause 12 of the Shareholders Agreement covers the parameters of the Trading Window.
Clause 3 in the constitution covers the Purchase of own shares. Reading this now 3.1 might have a typo….It is a permitted activity subject to the Act, sections 59 and 67a. but with regard to our discussion yesterday I think we are okay for the company to purchase and allocate to staff, but I am not the lawyer at the table…
Items we need to keep front and centre for the communication to Shareholders re the Trading Session
The below clause is from the constitution and relates to the ability of the company to buy its own shares… The company will be buying some shares to fulfil employment obligations it has made. How this plays out in actual practice I am not yet sure. I may just get the people involved to buy the shares and reimburse them. Just an awareness item at the moment.
1. Purchase of own shares
1.1 Purchase by Company of its shares
The Company may purchase or otherwise acquire shares issued by it in accordance with, but subject to, the Act, but subject to the Shareholders Agreement.
1.2 Offer to one or more Shareholders only
For the purposes of section 60(1)(b) of the Act, the Company may make such offer to one or more Shareholders, without having to make such offer to all Shareholders, in accordance with section 61 of the Act.
1.3 Holding by Company of its shares
The Company may acquire and hold shares issued by it in accordance with sections 59 and 67A of the Act.
The Shareholders Agreement is attached above. Sections 12 and 13 are relevant. I have asked for the appropriate legal words to communicate to the Shareholders in this process, but for us to make sure as well we should reference these sections and in general ensure we do as this clause states.
This is a link to the SDL annual report…way more involved than were we need to be going for the share trading window…but thought the tone and topics might be helpful as we put content together..
PS Steph this might be good for you to have on file as well..
Keegan, Stephanie looks after our marketing and I am wanting to make sure we have all the marketing assets Orchestra will need for the share trading window, that are Streamline Business Group specific.
Based on the provided example (Health Co), I think it looks pretty straight forward, but can I please get you to liaise with Stephanie around the requirements. Steph is away on holiday at month end, so we need to make sure most of this is sorted before she leaves.
On another note the copy is being worked on by Stephen Olsen of Palaver media and I. Again we are using Health Co as the model of what to cover as to tone and volume of words.
Stephanie – great to be introduced to you. And yes, you and I can work together to ensure all bases are covered in terms of marketing collateral needed. I’m also looping in Ben Tan again, as he is our resident share trading specialist and will be able to assist with types of images (format and sizing) that we’ll need etc. That’s not my field of expertise, but I’ll contribute where I can.
Stephen, if you have any questions or would like a bit of guidance on what to include please let me know. It doesn’t have to be ‘War and Peace’ but more of an idea of the general state of the business.
I’m going to send you across some documents separately now Craig, which might help too.
From your 27 Sept message I understand that you’re looking to leave the ALL staff/ ALL shareholders to a later point. This is because you’ll get clarity from the appetite from NZ staff / Existing shareholders first?
Will you go ahead with the later message regardless. How would that differ?
Thinking on the below prompted some questions for our chat…
- Communication is just to NZ staff in the first instance?
- This is being pitched as an Invitation to Participate?
- Does the platform (Orchestra) have good material on this process that can be shared or quoted from
Can imagine both sets of messaging need Intros that walk people into this but are also encouragements to Participate, without any pressure. Also some questions about types of ‘segmenting’ & distribution you might have in mind eg.
- Will some messages be segmented for Staff by any things like length of time with the company?
- Will messages be sent in an individualised way? ie. individualised emails?
- Given the small set of existing Shareholders you would look to personalise even more?
Can we please have a chat re this.
We need to get a communication out to NZ Staff and the existing Shareholders regarding the mechanics of the first trading session, set down now for the week beginning the 14th November.
During this session I am hoping that some of the NZ staff will be active buyers and some external holders sellers.
It will be followed up later by a communication to all staff and all shareholders. The next trading session will be May or June next year.
Want to get an indication of what is actually up for sale…I am surmising at this point.
10 Oct – Craig to Tom Logan, PwC
Hope you had a good weekend and are surviving the school holidays.
We are working on the communication to Shareholders and the New Zealand based Streamline team members, in respect to the share trading window that is scheduled to take place in the week commencing 14th November 2022.
On Monday the 7th November I want to send a specific communication on the mechanics of how this trading window will work and also any of the legal items / disclaimers that we will need to make sure everyone is well aware of.
The half year results will be sent at this time as well in the format provided by Orchestra.
The expectation is the board would make some commentary regarding the results and the future trading outlook.
I also thought the board could provide a range where they thought value could be, but clearly without causing any legal issues. The platform is all about the willing sellor / willing buyer.
In this trading session, only existing shareholders and NZ based staff will be able to take part. We are looking to keep the total number of shareholders well under 50.
The trading session scheduled for May 2024 will be open to all staff, ie India and Fiji as well as the NZ team. At that time we will need to have in place the bare Trust etc. so that any shares taken up by the offshore team can be held by it.
Armed with all the above, should we have a face to face session on this…should we have Keegan from Orchestra invovled in that session as well?
I am looping in Ben Tan, he’s the Head of Product for both Orchestra and Snowball Effect. And the man behind our secondary trading platform. All the slick design work and complex stuff that looks easy is thanks to Ben and he’ll be playing a lead role in the execution of the event for SBG Ltd.
Thanks for sharing the Constitution and SHA, I’ve had a look through both of these. For new shareholders, we will need for them to sign a Deed of Accession, is PWC okay to provide that? And as far as pre-emptive rights goes, your Constitution is pretty favourable to the board’s discretion, so I don;t think we need to worry about offering shares to existing shareholders which will make life easier.
As far as the trading report, P&L, Financials go, I wouldn’t go too crazy with detail. It can be as basic as what is outlined on this page. For this first event, most of the participants will have a good understanding of what shape the business is in. It’s more about ticking the right boxes and making sure that individuals have the right information to make informed decisions.
Ben and I will start putting together both the engagement agreement and participation agreement too. I expect we can have this turned around in a week or so. I’ll be in touch once we have something for you to review.
16 SEPT received 5 October
As discussed, propose to implement either a bare trust or a nominee company to house the new overseas employee shareholders (once May event has concluded). This will be executed by PWC and replicated on Orchestra
There is no need to have event participants as Orchestra users before the event begins, we can generate a unique URL which can be shared directly to participants. Following the event, when the shares are issued (beneficially) to new shareholders they will be invited to sign up to Orchestra.
Late Sep – start working on necessary trading documents such as:
1. Trading report
2. Profit & Loss statements
3. Financial Statements
4. Overall position of the company
5. Deed of accession necessary? Or covered in the Constitution? CP to confirm.
KVG/Orchestra to provide:
1. Participation agreement for employees
2. Engagement Agreement for SBG Ltd to use trading platform
Communications begin, notifying existing shareholders and NZ employees of event.
How event is structured, who can participate, reason for event. Does CP want to include outline of plan for overseas employees event as well?
New shareholders will be housed in SBG Ltd directly, rather than baretrust/nominee structure.
Run event for existing SBG Ltd shareholders + NZ-based employees
This will facilitate the establishment of FMV share price which can be used for supplementary events.
Gain feedback from CP and tweak as necessary.
Event for non-NZ based employees to be able to buy shares. CP to place sell order of 250-300k shares.
Also – can you please send the constitution so we can review?
I think that should be about it for the moment, if I have forgotten anything just let me know.
Have a good weekend!
Healthy Co supplies nutritional products, clinical services and wellness testing nationwide, selling most of its products and services on a subscription basis.
Closed 12:00am, 30 September 2022
16 buy orders
Market clearing price
8 sell orders
About this share trading event
This event is run by Healthy Co to facilitate the trading of shares between new and existing shareholders. A trading price will be determined at the end of the event and applied to all eligible orders.
Healthy Co supplies nutritional products, clinical services and wellness testing nationwide, selling most of its products and services on a subscription basis. Healthy Co is leading the health space in New Zealand and enabling customers to be proactive and take back control of their health.
Healthy Co was originally founded by Frank Munroe. Frank had a vision of happier and healthier communities across New Zealand, achieved by creating a new future for health. His vision has become our company mission.
Healthy Co has grown its revenue from $2.8m in FY16 to $10.4m in FY20 (a 39% CAGR), delivering consistently strong GP margins of between 44-57% and positive EBITDA over the same period.
In late 2019 Healthy Co raised $5m of new capital to fund stock purchases and development of the a home delivery system, as well as undertaking an upgrade of the Healthy Co ecommerce experience. During the last 8 months the business has largely tracked as planned – we have seen a continuation of excellent growth within Healthy Co Health, primarily driven by increased marketing spend, as well as a recent partnership with GreenCross.
Globally the wellness market continues its strong growth, and we have seen a number of high profile US based M&A transactions (Vitality Co and Eat Well Co) to multinationals already in 2020.
In March this year we entered into a formal partnership with GreenCross who own Unichem and Life Pharmacies. We had been in discussion with GreenCross for around year, before finalising the partnership agreement in March. Key to this agreement has been minimum order quantities which GreenCross has committed to for the next 36 months. This commitment amounts to $200k per month for the first 12 months (from March), $300k for the second 12 months, and $350k for the third. Distribution will be through Life Pharmacies nationwide.
As we move into the second half of the financial year, we are confident that we are on track to hit our group financial targets. At this stage we anticipate that Healthy Co home programme revenue to be broadly on budget.
We are targeting Australia as our first offshore market. We anticipate launching with our home programme in conjunction with a high profile partner, and quickly following this launch with our suite of consumer products. We have stepped up our online and social media marketing in the Australian market, but online sales are still modest (<5%) of total revenue.
Highlights – YTD
- Launched our new home programme
- Introduced 30 new products to market
- Increased sales for the same period by 20%
- Online sales have increased by 50% during COVID
- Subscription churn has been lowered to 5%
Lowlights – YTD
- Product packaging included incorrect labelling
- Workshop rent increased by 20%
- Trademark in Australia potentially taken
People Update – YTD
- 4 new sales reps starting in October
- Sarah Fergusson joins us in November as the new Marketing Manager
- Our accountant is now onboard full-time
FY20 Financial Performance
Please refer to FY20 accounts in shareholder update.
In October 2019 Healthy Co raised $3m at a post money valuation of $13m ($1/share). Since this capital raise there have been no major transactions which have revalued the business. Over the last 12 months the business has performed broadly in line with financial projections, and has secured a significant commercial contract. Directors anticipate that the clearing price for shares traded will be in a range between $1-$1.40, but recognise that thinly traded, companies often trade outside of a ‘fair value’ range depending on a number of factors.
- Cash Remuneration: There has been no changes to remuneration for key people during F21. Any changes to key people remuneration need to be signed off by the independent directors
- ESOP: Under the shareholders agreement the board can at its discretion issue up to 5% ESOP to staff, providing the independent director provides approval.
- Transfer of Shares: There have been no transfers of shares within the last 12 months by executives. 47,000 shares have been transferred between minor shareholders (held within the nominee).
- Trading by Related Parties: No related parties, including staff intend to trade shares during the upcoming window. If any insiders do choose to trade, the market will be notified immediately.
- Future Funding: While there is no existing plan, or identified requirement, to raise additional funds after this funding round, the directors have received an approach from a potential strategic investor which may provide other benefits for Healthy Co, if it progresses further. The directors may also elect to raise additional capital in the future to accelerate growth plans or take advantage of other opportunities that will increase shareholder value, as they arise.
Immediately before trading event
|Shareholder||Current shares||Current percentage|