Crowdcube approves every pitch on the platform to ensure it is fair, clear and not misleading. Our Due Diligence Charter outlines the analysis and verification that is conducted on equity fundraises on Crowdcube.
In line with our company values, our guiding principles for this Charter are:
- Integrity; to act with integrity and treat our investors and fundraising companies fairly
- Diligence; to act with skill, care and diligence
- Transparency; to be open and transparent with our customers at all times.
Investor protection and transparency are of the utmost importance to us, so we continually review our existing due diligence processes to ensure we remain at the forefront of the investment crowdfunding market. This Charter outlines Crowdcube’s current standard due diligence process.
Due to the diversity of businesses that raise finance on Crowdcube’s platform, we cannot cover all situations in this Charter, which should be read as guidance. Crowdcube does not endorse any of the businesses raising finance on the platform, nor do we provide investment advice of any description, so before deciding to invest we strongly encourage all Crowdcube members to undertake their own research and if there is uncertainty, to receive independent advice before investing.
Prospective investors should also take care to:
- carry out their own due diligence and read all information and documents on the pitch page carefully. This Charter outlines areas that are not reviewed as part of our standard due diligence process;
- read the risk warnings; and
- understand that forward-looking statements and entrepreneur opinions may not turn out to be correct and many early-stage companies fail.
Investors should be aware that Crowdcube relies upon information provided by every applicant company and its directors who are required to ensure all information provided is true and accurate. Crowdcube also relies on third-party tools to conduct some due diligence. Crowdcube’s investor terms and conditions, including Crowdcube’s limitation of liability, apply to investments made on the site and can be found here.
Where we list companies in partnership with our US partner platform, we rely on the checks and due diligence they undertake. US companies are therefore not subject to our Due Diligence Charter.
Crowdcube’s Due Diligence Charter was last updated in July 2017. Previous versions of the Charter can be found here.
Pre-live Due Diligence:
The following due diligence is carried on each company before the pitch is open to investment:
- conduct background checks on the company and its directors including personal credit and bankruptcy checks, director’s disqualification checks, previous company checks and accreditation checks. Using Creditsafe, a leading third-party provider;
- conduct checks on the directors to confirm there are no un-discharged bankruptcies;
- fact check all statements and claims made in the pitch text to ensure it is fair, clear and not misleading by obtaining, where possible, independent evidence. Certain statements may rely on the company’s own systems - for example, stock or customer management systems;
- obtain any commercial contracts mentioned in a pitch, and
- verify any material professional accreditations.
- if applicable, check whether the company has received SEIS or EIS Advance Assurance and make clear to potential investors the availability of such tax relief.
In addition, every company that raises capital on Crowdcube's platform provides warranties to Crowdcube in Crowdcube’s terms and conditions that include:
- that the share capital table accurately reflects the fully diluted position, which means all dilutive elements, such as granted and unallocated share options, are taken into account in calculating the percentage of equity on offer to investors; and
- that the company is not party to any current litigation and that it is not aware of any threatened litigation.
Live Pitch Monitoring:
During the time the pitch is live on Crowdcube's platform, the compliance team will also:
- review any investment patterns notified by Crowdcube’s pitch manipulation tool to ensure investments are genuine and not made to unduly enhance the performance of a pitch.
We do not:
- review any of the restricted documents, pitch videos, pitch updates, forum discussions or the content of investor events that aren’t organised by Crowdcube.
Post-funding Due Diligence:
Once a pitch has reached its funding target we conduct further due diligence on the business before investments are completed and prior to any funds being captured:
- check the company’s share structure against Companies House filings and seek clarification of any discrepancies;
- review the Articles of Association to ascertain the share classes and their rights;
- review any existing Shareholder Agreements, Subscription Agreements or Investment Agreements to check whether the shareholder rights and company obligations are compatible with a crowdfunding round. Based on this review we may, if we consider necessary, recommend amendments to the documents or make appropriate disclosures to investors to outline investor rights or risks;
- review any known commercial loan agreements, convertible loan instruments and any director and/or shareholder loan agreements, and require any undocumented loans to be documented;
- require the company to warrant that the share price payable by investors has been calculated on a fully-diluted basis, taking into account all issued shares, options and convertible loans;
- a full search and review of intellectual property rights are not carried out but claims of trademark, patent, or URL ownership in pitch text are checked by seeking verification from the company and searching public registers. We also require the transfer of ownership to the company if Crowdcube becomes aware that any material intellectual property rights are not wholly owned by the company.
Any necessary disclosures from the post-funding legal due diligence process are set out in the Legal Review document, which will be emailed to investors at the beginning of the seven days cooling off period.
The following information, unless specifically mentioned in the pitch, is not always reviewed as part of our standard due diligence, so investors should assume that the following have not been checked:
- commercial contracts;
- employment contracts;
- ownership of assets or the potential that a company infringes third-party intellectual property rights;
- property related documents such as leases;
- complete site visits to a company’s offices; and
- licensing and regulatory arrangements;
- historical financial performance of the company;
- financial projections of the company;
- cash position and cash burn of the company;
- key suppliers or customers of the company.
Whilst we do provide guidance on valuations, it is the company’s decision to price their investment offer and ultimately the crowd then decides if they are willing to invest at that price.
Under Crowdcube’s Terms and Conditions, every applicant company, acting by its directors, must ensure that all information which is provided to Crowdcube is true and accurate.