Nominee option

An alternative shareholder structure

Snowball Effect has prepared documentation and processes so that investors can hold shares directly in the operating company, or in a nominee company which holds shares in the operating company.

Using a nominee means that the company will end up with only 1 extra shareholder (the nominee) after the offer has closed, with all Snowball Effect investors holding shares in the nominee.

If you would prefer to use a nominee structure, Snowball Effect will require a clear plan for the ongoing management of the company. Snowball Effect can offer these management services if this is something you would like to consider – we can provide further information and recommendations once we have a deeper understanding of your business.

Common objectives of a nominee company are:

  • Avoid the Takeovers Code. Some companies wish to avoid a body of regulation called the Takeovers Code, which applies to companies with more than 50 (voting) shareholders and 50 share parcels. This objective can usually be met by offering non-voting shares. And the Takeovers Panel has issued a partial exemption from the Takeovers Code for smaller companies.

  • Avoid enhanced financial reporting obligations. Some companies wish to avoid enhanced financial reporting obligations that apply to companies with 10 or more shareholders. If desired, this objective can also usually be met by offering non-voting shares.

  • Perceived hassle of dealing with a large number of shareholders. The occasional company is concerned about ongoing administration for a large number of shareholders. We don’t consider this perception to be true, assuming professional share registry management and electronic communications (we provide these solutions).

  • Avoid concerns about follow on investment. Some companies intend to raise funds in the future from venture capital or private equity organisations, who may have a preference for fewer shareholders on the share register.

This information does not constitute legal advice. Each company should seek their own professional advice.


If you would like to discuss the pros and cons of nominees in greater length, please contact Shaun Edlin at [email protected] or 022 106 2757.

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