It is essential that a syndicate is well managed and all members are clear about their commitment and responsibilities. This is required to take advantage of the benefits and mitigate the challenges of investing in a syndicate.
Irrespective of the chosen form for the syndicate the following is recommended:
(see the "Options for Syndicate Structures" section as outlined in the HBAN Syndicate Pack, available from HBAN),
• a syndicate charter;
• a syndicate agreement; and
• a syndicate membership application form.
A sample of each is provided in a syndicate pack.
A syndicate charter can be addressed under the following principal issues:
• standard of conduct of members, informing syndicate reputation in the marketplace;
• confidentiality and conflicts of interest;
• participation and on-going responsibilities of members including actively participating in pre-investment due diligence and post-investment monitoring and support; and
• modus operandi including minimum amount that individual investors are expected to invest in any given deal in which a member participates.
For the Light Touch structure (see Options for Syndicate Structures, see HBAN syndicate booklet), the Syndicate Charter can be used to open a bank account in the name of the syndicate to facilitate the collection of any membership fees and making any payments related to the operation of the syndicate.
A syndicate investment agreement will include the following:
• Appointment and duties of syndicate representatives as co-shareholders in relation to a particular investment;
• Provision for majority voting; and
• Outlines how new members are facilitated.
Syndicate Membership Application form
A syndicate membership form will include the following:
• Basic investor details and his/her investment and professional experience;
• Indicative amounts available for investment;
• Time available for involvement;
• Legal acknowledgements; and
• Agreement to be bound by the charter.
A syndicate may decide to charge a fee to its members.
This fee would cover the costs of the syndicate operation and not any costs in relation to making, managing or realising any one investment. These latter costs are dealt with separately. However, as a syndicate grows and becomes self-sustaining, a syndicate member or a third party could undertake deal sourcing, some due diligence and activities supporting the completing of investments; in this case, membership fees could contribute to such costs. Costs relating to making, managing or realising investments may also be funded via an agreed fee calculated as a percentage of the money invested.
Examples of syndicate operation costs include:
• meeting costs (e.g. venue and catering);
• branding establishment and promotion costs including maintaining a website;
• office costs (e.g. part-time administrator, post, insurance); and
• governance (accountants and solicitors fees).
It is for each syndicate to decide on the level of membership fees charged.
Currently for those syndicates that charge fees, the annual membership fee ranges from €500/£350 to €3,000/£2,500 excluding VAT.
If you are interested in joining HBAN as a syndicate member, please register with HBAN here.