Equity Gap - Early Stage Investment

Investing in Emerging Businesses throughout Scotland

Membership Rules

These are the rules under which opportunities may be offered to members of Equity Gap Syndicate ("Equity Gap") and the procedures adopted for the completion of investments by members.

Equity Gap is an unincorporated association consisting of its Office Bearers (the "Board") and a larger group of members ("Members"). The syndicate is administered by Equity Gap Limited, a company limited by guarantee. Jock Millican is the chairman of the administrative company and the “Gatekeeper” of Equity Gap.

The provisions of the Financial Services and Markets Act 2000 and the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (together the "FSMA") have been taken into account in framing these rules.

1. A Gatekeeper or other advisor may be appointed or engaged by the Board to identify, assess and vet investment opportunities and carry out initial due diligence

2. All new business proposals and requests for further funding will be reviewed by the Gatekeeper. Members shall be entitled to send information memoranda to the Gatekeeper on behalf of companies seeking investment.

3. All written and oral information provided to Members shall be provided by or on behalf of the company seeking investment. No representation or warranty, express or implied, is or will be made and no responsibility or liability is or will be accepted by Equity Gap, the Gatekeeper or by any of its Members in relation to the accuracy or completeness of this information.

4. Each Member acknowledges that a decision to invest is a personal decision and that no responsibility for the consequences of that decision is accepted by Equity Gap, the Gatekeeper or by any of its Members. Dissemination of post-investment information is the responsibility of the investee company to the individual investor.

5. Equity Gap is not regulated by the Financial Services Authority and the Financial Services Compensation Scheme established for the protection of investors does not apply to it. The content of information memoranda and the terms of investment opportunities will not be approved by an authorised person within the meaning of the FSMA.

6. Investing in private companies is highly speculative and Members should be aware that no established market exists for the trading of shares in private companies. Members are recommended to seek independent financial advice from their stockbroker, solicitor, accountant or other independent financial adviser authorised for the purposes of the FSMA if they are resident in the United Kingdom or, if not so resident, from another appropriately authorised independent financial adviser.

7. All Members are required to comply with the certification requirements of the FSMA and the terms of the Money Laundering Regulations 2007. FSMA certification and money laundering requirements must be renewed every year and failure to comply with these requirements shall result in the immediate termination of membership.

8. The completion of investments will be co-ordinated by the Gatekeeper, who shall act as the agent for the investors. Members shall make their own investment decisions and the Gatekeeper shall obtain their consent to decisions which will affect any investment. Members will be asked to sign a Power of Attorney nominating Board members to execute investment agreements and ancillary documentation relating to any investment.

9. Members will fully disclose to the other Members any matter which might reasonably be considered to prejudice any investment by other Members or which might reasonably be considered to constitute a conflict of interest.

10. Members acknowledge that as a Member they will receive confidential information and they hereby agree to keep such confidential information secret and not to disclose such confidential information to any third party.

11. Membership of Equity Gap costs £350 per year, payable upon joining and annually thereafter.

12. Members who make investments will be charged a fee by Equity Gap of 3 % of the total amount they invest.

13. The minimum investment by Members in any single investment shall be £5,000.

14. Equity Gap may, if determined by the Board, become a partner of Scottish Enterprise. This may mean that Scottish Enterprise contribute in investments alongside Equity Gap. Such investment by Scottish Enterprise will be on the same terms as apply to individual Members.

15.1 Equity Gap may suspend or terminate the membership of any Member who, as determined by the Board (acting in its sole discretion):

(a) has breached any of these Membership Rules;
(b) has failed to disclose a material fact or makes a material misrepresentation in an application for membership;
(c) has engaged in conduct that reflects poorly on Equity Gap, or which is deemed to be against the best interests of Equity Gap; or
(d) has solicited or accepted any compensation for presenting an investment opportunity to, or for raising capital from, the Members of Equity Gap.

15.2 Decisions regarding the termination, suspension or non-renewal of membership are final and not subject to any appeal. The sole recourse any Member has over any disagreement with a decision of Equity Gap, regardless of its scope or nature, is to withdraw from membership of Equity Gap.

16. Members hereby agree to indemnify Equity Gap and the Members against any claims made as a result of their failure to comply with these Membership Rules.

17. Members agree that the Membership Rules may be varied from time to time by the Board and that Members shall be bound by the terms of any such variation

18. Rules 2, 10 and 16 shall survive the termination of membership of Equity Gap and shall continue to be binding upon Members in any question with Equity Gap, the Board or their former co-Members.

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