COVID19 Package – application to startups

COVID-19 – Government Stimulus Package – Guidance and Comment
Important update 31 March 2020.

Thanks again to the team at Avid.legal for pulling this together.

On Friday 27 March 2020 the government announced:

1. significant changes to the Wage Subsidy, and
2. that it has ended new applications under the Leave Payment Scheme.

On Saturday 28 March 2020, the government published a further clarification to the changes it introduced to the Wage Subsidy.

These changes render some of the information in our 24 March 2020 update (further below) void for new applications.

 

Most significantly, a revised declaration now applies to the Wage Subsidy for applications made after 4pm on Friday 27 March 2020. You can review the revised declaration here: https://workandincome.govt.nz/online-services/covid-19/declaration-wage-subsidy.html

These changes will have a significant impact on how some businesses may use the Wage Subsidy and how it fits in with wider coping strategies compared to businesses who applied before the cut-off. Changes include (but are not limited to) applicants agreeing to:

  • not make any changes to any obligations under an employment agreement (e.g., remuneration, hours of work and leave entitlement) without the written agreement of the employee;
  • retain the employees named in the application as employees for the period the employer receives the subsidy in respect to those employees;
  • not unlawfully compel or require any of the employees named in an application to use their leave entitlements for the period the applicant receives the subsidy in respect of those employees;
  • only use the subsidy for the purposes of meeting the named employees’ ordinary wages and salary (and the employer’s obligations in relation to the subsidy);
  • remain responsible for paying named employees’ ordinary wages and salary for the period the employer receives the subsidy;
  • for the period the subsidy is received:
    • use best endeavours to pay at least 80 per cent of each named employee’s ordinary wages or salary; and
    • pay at least the full amount of the subsidy to the named employee; but
    • where the named employee’s pre COVID-19 remuneration was ordinarily less than the subsidy (i.e. less than $585.80 or $350), pay the named employee that amount.

Other new aspects of the declaration include some strict requirements about:

  • needing to discuss the application with named employees before making the application;
  • obtaining named employees’ consent to including their details in the application for MSD to use and share (ideally in writing); and
  • advising named employees that they have the right to request access to all information held about them under the Privacy Act, and that they can contact [email protected] to make a request.

Maintaining good processes and record keeping will be critical. The increased requirements in the declaration must be carefully worked through before submitting an application. Businesses should pause and ensure they can established that they comply. Businesses may be subsequently audited. If a business cannot establish that it was eligible, or that it adhered to the conditions set out in the declaration, the business risks being required to repay the subsidy and potentially criminal sanctions.

Lastly, payment-processing times have reportedly slowed. If your claimed amount has not been paid within a week, it is worth calling MSD.

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New Regime at Angel Association New Zealand

As outgoing Angel Association New Zealand Chair, John O’Hara steps down from his two-year term, the AANZ today announced the appointment of the current Executive Director, Suse Reynolds to the role.

“As an active angel, a co-founder of Wellington’s 90-strong AngelHQ and one of the first AANZ Council members, this appointment is not only a natural progression for Suse it also marks the beginning of an exciting new period of activity for the AANZ,” said John O’Hara.

The AANZ is also delighted to announce the appointment of Bridget Unsworth to the position of Operations Director. Bridget brings deeply relevant experience following nearly 10 years as Investment Director of the seed co-investment programme at the New Zealand Venture Investment Fund.

Both appointments will take effect from 31 March.

Suse Reynolds acknowledged the contribution John O’Hara has made to the Angel Association noting he led work to establish Flight, an annual programme of events to support investor directors, instigated The Runway, an initiative to bring together founders and investors, and that he spends countless hours mentoring and supporting founders and investors. John will remain an active and engaged angel and mentor.

In a little over a decade, formal angel investment in New Zealand has grown from three or four networks with about 300 investors to over a dozen networks with nearly 1000 members investing over a $100m per annum. Over 250 start-ups have received angel investment in that time.

Looking to the next decade Suse Reynolds said the industry would double-down on growing angel investment but will also bring a tighter focus to the support being provided to those founders and investors making traction to help them expedite their growth and generate the financial and socio-economic returns expected of the asset class.

“It is important that we continue to grow the pipeline of investors and investment as there is no shortage of deal flow. Literally dozens of incredible start-ups are being generated every year by ambitious, creative kiwis commercialising their own ideas and the stunning IP being generated by New Zealand’s universities and crown research organisations,” said Suse Reynolds.

“It is equally important we expedite the success of the current portfolio of angel-backed ventures. The AANZ is about to put our programme of connectivity and professional development on steroids. We learn best by doing and by sharing the doing – so look out for more events bringing experienced and inexperienced founders and investors together, more governance workshops, more on how to navigate term sheet negotiations and more on how to ensure cap tables are in good shape,” Suse Reynolds pointed out.

Scott Gilmour named New Zealand Arch Angel 2019

Scott Gilmour has been awarded Angel Association New Zealand’s (AANZ) Arch Angel Award today at the 12th New Zealand Angel Summit in Christchurch.

Scott is an experienced high-tech company founder and director and an active Ice Angels member and former board member. In 2002 he founded the first I Have A Dream project outside the USA to help kiwi children.

The Arch Angel Award is the highest honour in New Zealand’s angel investment community, given to those who best exemplify the quintessential angel and who are champions for the endeavour making a significant difference to New Zealand’s start-up ecosystem. As well as their personal capital, Arch Angel recipients share their time, insights, deeply relevant skills and their networks with high growth start-up companies.

The recipient is chosen by the previous years’ winners.

Scott Gilmour has over 35 years experience in the high tech industry, including 12 years with Intel in the United States and New Zealand. He co-founded a successful enterprise software company in the United States in 1989, ABC Technologies Inc., which was sold to SAS in 2002. He served for seven years on the NZ Trade and Enterprise Beachheads Board. And has served as a director and investor in a number of New Zealand tech companies, including Jade, Nextspace, ResourceWare, ViFX and Winscribe.

In 2002 Scott founded and funded the first “I Have a Dream” project outside the United States to “inspire dreams and enable futures” for kiwi children who are living in material hardship.

As a super active angel investor, Scott has invested in over 60 ventures. He is a founding member of Auckland-based Ice Angels, having joined the network at its inception in 2003 and served on the board for four years between 2006 and 2010.

Current Angel Association Chair and fellow Ice Angel, John O’Hara, says Scott has been a lynch pin of New Zealand’s first formal angel network.

“As a founding member of Ice Angels, I doubt there are many, if any, other Ice Angels members who have been such passionate and committed champions of angel investment. Scott has personally introduced and “closed” more new Ice Angel members than any other I can think of,” he said.

Scott received his award at the 12th New Zealand Angel Summit, held at Pemberton in Christchurch and attended by 160 delegates. The annual event provides a hub for angels to learn and network, and is recognised as one of the world’s top angel events. This year’s summit is exploring what it is about scaling an angel-backed venture from New Zealand which gives it a unique comparative advantage when it comes to creating exponential value.

Former Arch Angel winners include The Warehouse founder and long-time angel investor Stephen Tindall; Andy Hamilton, chief executive of The Icehouse and member of IceAngels; US super angel Bill Payne; Movac venture capital firm founder, Phil McCaw; veteran angel investor Dr Ray Thomson; prolific AngelHQ member, Trevor Dickinson, former AANZ Chair, Marcel van den Assum, ardent angel investor, Debra Hall and champion for kiwi start-ups, Dave Moskovitz.

–Ends–

 

For more information, please contact:

Suse Reynolds, AANZ executive director
mob: 021 490 974 or email: [email protected]

John O’Hara, AANZ chair
mob: 021 040 3198 or email: [email protected]

The Angel Association of New Zealand (AANZ)

The Angel Association is an organisation that aims to increase the quantity, quality and success of angel investments in New Zealand and in doing so create a greater pool of capital for innovative start-up companies. It was established in 2008 to bring together New Zealand angels and early-stage funds. AANZ currently has 40 members representing over 800 individual angels associated with New Zealand’s key angel networks and funds. AANZ works closely with NZTE and Callaghan Innovation and a number of private sector partners including Jarden, PWC, Avid Legal, Baldwins, KiwiNet, Uniservices, Amazon Web Services, BNZ and BECA. For more, please visit: www.angelassociation.co.nz

 

Angel Awards Announced Suse Reynolds, Katherine Sandford and Tim Allan recognised

At its 10th Anniversary Summit in 2017, the Angel Association New Zealand announced two new awards to augment the Arch Angel Award which was first awarded in 2009 to Sir Stephen Tindall and was today awarded to Scott Gilmour.

The Puawaitanga Award recognises the founder and investor-director who best exemplify what can be achieved when committed people draw on their collective skills and experience. This award celebrates an angel-backed venture achieving world class success. This venture has excellent governance, a compelling business proposition and a well-defined strategy for exponential returns.

Puawaitanga – ‘best return on integrated goals’.

The Kotahitanga Award recognises those people in the angel community who have made an outstanding contribution to the industry. It acknowledges those who have selflessly given personal time and energy for a sustained period and contributed to the professionalism, profile and reputation of angel investment in New Zealand.

Kotahitanga – ‘unity and a shared sense of working together’.

The Puawaitanga Award has been presented to UBCO Bikes CEO Tim Allan and investor-director chair, Katherine Sandford. UBCO has developed all terrain, electric utility motor bikes. Since the concept was launched at the 2014 National Field Days, the company has gone on to refine the bike and is now selling it in Australia, New Zealand and the USA.  Impressively, UBCO has also since won a number of awards including a Deloitte Fast 50 Rising Star award, Good Design and Best Design awards, been recognised as a TIN100 Spark Early Stage Company and last year won an AmCham exporter of the year award. Katherine Sandford has Chaired the UBCO Board for the last two years and is a true champion for the company helping it raise several million dollars in growth capital. Katherine has been a member of Tauranga’s Enterprise Angel network for the last four years, has served on the Enterprise Angels’ board and last year won the network’s investor director award.

In making the award, Angel Association Chair, John O’Hara said Tim and Katherine are exemplars of what investor/founder alignment and mutual support can achieve.

“No one scales value in a high-growth tech company on their own. To get traction both the founder and the investors need to be committed to the same end-point. This is clearly the case with UBCO. Tim and Katherine, together with the rest of the UBCO team, have been working together to generate great progress in terms of revenue generation, customer acquisition and to secure capital to amplify that growth to generate success for investors and just as importantly, for New Zealand as a whole,” he said.

The recipient of the Kotahitanga Award is Angel Association NZ’s Suse Reynolds.

Suse has been supporting angel investors, angel backed founders and the growth of angel investment in New Zealand for over a decade. Suse was a career diplomat before taking the leap to “live the startup dream’’.

As well as providing countless hours of free advice and counselling to angel investors and founders over the years, Suse currently serves on the Board of AngelHQ. Suse has also fronted dozens of workshops on topics such as angel investment, governance and has led the Angel Association’s flight program. Suse has been particularly helpful to establishing a number of regional angel clubs around New Zealand.  Suse is a successful angel investor in her own right and most recently has led a couple of early angel rounds into Press Patron and Narrative Muse.

“Suse exemplifies the values which make angel investment rewarding and successful. Her warmth, generous spirit, ambition, professionalism, depth of knowledge and genuine care for investors and founders alike have imbued New Zealand’s startup ecosystem. We are fortunate to have people like Suse leading our community,” said John O’Hara.

–Ends–

 

For more information, please contact:

Suse Reynolds, AANZ executive director
mob: 021 490 974 or email: [email protected]

John O’Hara, AANZ chair
mob: 021 040 3198 or email: [email protected]

 

The Angel Association of New Zealand (AANZ)

The Angel Association is an organisation that aims to increase the quantity, quality and success of angel investments in New Zealand and in doing so create a greater pool of capital for innovative start-up companies. It was established in 2008 to bring together New Zealand angels and early-stage funds. AANZ currently has 40 members representing over 800 individual angels associated with New Zealand’s key angel networks and funds. AANZ works closely with NZTE and Callaghan Innovation and a number of private sector partners including Jarden, PWC, Avid Legal, Baldwins, KiwiNet, Uniservices, Amazon Web Services, BNZ and BECA. For more, please visit: www.angelassociation.co.nz

NEW CAPITAL RAISING TEMPLATES – Key Changes

Angel Association NZ has taken over stewardship of industry templates from the NZ Venture Investment Fund for angel and early stage investment transactions. We have recently released 5 new equity investment templates, which you can find here, that update and replace those originally developed over a decade ago. These documents include:

  • Term Sheet (equity investments)
  • Subscription Agreement
  • Shareholders Agreement
  • Constitution (for companies with ordinary shares)
  • Constitution (for companies with preference shares)

A year or so back the AANZ convened a working group of representatives from half a dozen law firms led by AANZ sponsor Avid Legal to update outdated industry templates. We are particularly grateful for input and support from Simmonds Stewart, Chapman Trip and Simpson Grierson. Below is a summary of the key updates and the rationale for these changes.

Explanatory footnotes 

Like all templates, these new documents are only a starting point.  The aim is not to impose a fixed set of terms on parties which may result in an agreement that is out of alignment with the context and intention of their investment.

With this in mind, explanatory footnotes have been included in the new term sheet.  These footnotes are not exhaustive, but aim to provide enough information for new users to:

  • understand the optionality and high-level impact of the various terms;
  • undertake further research, or seek independent advice, on the purpose and consequences of those terms; and
  • have greater confidence amending or removing terms that are not appropriate in the context of the investment.

As always, if in doubt, it is recommended that you seek independent advice from someone with experience in early stage company capital raising.

More efficient structure for follow-on investment rounds

A key structural change has been the move away from a combined “Subscription and Shareholders’ Agreement” to a separate:

  • Subscription Agreement – focusing on the present-day subscription for shares (investment conditions, payment terms, warranty and disclosure regimes etc.); and
  • Shareholders’ Agreement – governing the enduring relationships between founders, investors and the company.

Most early stage companies (and particularly tech companies) will go through a series of capital raising rounds as their capital needs grow over time.  Separating the documents allows the shareholders’ agreement to stand alone from the initial subscription terms so it is more easily (re)used and/or updated/amended, saving parties time and legal costs over multiple capital raising rounds.

Updates for recent market trends and law changes

Those familiar with the old templates will notice a number of shifts in the AANZ templates to align with recent market trends. At a high level, the AANZ templates display a softening of investor rights.  Again, it is important to emphasise that these positions are just suggested starting points.  Where parties land on various deal terms depends on the context of the investment, and the relative negotiating power of the parties. It’s very important to be aware of these factors when agreeing terms.

Some noteworthy changes include:

  • Calculating the issue price per share: The new term sheet clarifies how the issue price per share is usually calculated. Even some experienced investors and companies have struggled with the concept under the old documents. A separate blog post on this topic will follow soon if you wish to delve into the detail further.
  • Board composition:  The AANZ term sheet introduces a more flexible approach to board composition arrangements.  Under the old templates, some founders felt shoe-horned into losing control of the company’s board without giving the issue proper consideration.
  • Tranchingand milestones:  The AANZ templates move away from tranching investments unless the context provides sound reasons for doing so.  If tranching the investment is agreed, then the guidance is that proper consideration should be given to developing appropriate milestones.  The aim is to avoid unintentionally incentivising the company to pursue a milestone where that milestone is no longer in the best interests of the company.  Milestones should be linked to the company’s planned growth path, and align with key commercial objectives.
  • Anti-dilution:  If anti-dilution protections are agreed, then a “broad based weighted average” provision is suggested as the starting point.  This is comparatively more favourable to existing shareholders than the “narrow based” or “full ratchet” provisions that were seen in earlier templates.
  • Founder vesting:  Founder vesting provisions allow the company to take back a portion of a founder’s shares if that founder leaves the company within the vesting period.  The point of founder vesting is that:

o    it is unfair to the rest of the shareholders, particularly the other founders, if the founder leaves very early on in the life of a company; and

o    it may allow the company to use the equity (acquired from the departing founder) to recruit/incentivise the person who picks up the departing founder’s responsibilities.

The portion of founder equity at risk is often negotiated, and the AANZ term sheet provides general guidance based on recent market practice.  However, context is everything and vesting arrangements may be inappropriate if the founders have contributed significant cash, if there are appropriate vesting arrangements already in place, or if the company is at the more mature end of the spectrum.

  • NZVIF specific provisions:  The NZVIF specific provisions have been pared back to just the core reporting rights and prohibited business restrictions to align with NZVIF’s investment mandate. This allows parties to negotiate terms such as co-sale rights if it is desirable.
  • Simplified preference rights:  If preference shares are agreed, the AANZ template’s starting point is a 1x non-participating liquidation preference right without dividend preferences.
  • Regulatory updates:  The AANZ templates have been updated to reflect amendments to NZ’s Companies Act, and incorporate the requirements under the FMCA regime (including suggested safe harbour and eligible investor certificates to assist with compliance).

We intend to review the templates on an annual basis, and have a dedicated email address ([email protected]) for any comments to be submitted to the templates committee for consideration in such reviews.

We believe investors, companies, entrepreneurs and advisers will find the new equity templates user friendly, and a worthy addition to the NZ capital raising landscape.

 

Lead Partners

NZTE NZVIF PWC

Expert Partner

AVID “FNZC.jpg”

AANZ Summit Sponsors

Callaghan Innovation “UniServices” Kiwinet “Spark”