How to invest
All you have to do is sign up as a user through our registration form. By registering as a user, you will have access to information about the companies in which the CEF are invested. However, in order to invest in the funds, we will have to qualify you as an investor. To qualify as an investor, you must fill out and send us the signed Investor Registration Document. In addition, you must send us supporting documentation so that we can verify the information from the questionnaire.
There are two possible investment situations: the initial offer during the creation of a new fund and the subsequent investment-divestment in shares of the fund.
Initial offer in the creation of a new fund. Bewater Funds incorporates and manages investment funds whose assets are invested in unlisted companies. To incorporate the fund Bewater Funds must have sufficient expressions of interest. The process is very simple:
- Bewater Funds selects unlisted companies that meet established conditions. Information about the selected companies will be available on our site.
- Expressions of interest associated with the economic rights of the company are collected from future shareholders in the Fund.
- Once the specified time has elapsed and if there is sufficient interest, the initial offer is closed and the CEF (Closed-End Fund) is created with the original shareholders.
- Once the Fund is incorporated, shareholders of CEF can express the asset manager their interest in selling their shares though the website.
Purchase and Sale of fund shares. Once the initial incorporation of the fund is completed, shareholders of CEF can express the asset manager their interest to buy or sale their shares though the website.
- Shareholders of the fund can express the asset manager their interest to buy or sale their shares
- In the case of matching interest, the transaction is completed.
- In case any investor irregularities are detected, the investor will be expelled from the system.
Investing in Bewater Funds can be undertaken by persons considered to be professional investors (Artículo 75 de la Ley 22/2014).
Professional clients, in accordance with Article 205 of the “Texto Refundido de la ley del Mercado de Valores”, are considered to be those who possess the experience, knowledge and financial capacity necessary to make their own investment decisions and correctly assess the risks involved in these decisions.
In addition to professional and certain institutional investors, companies meeting the following criteria may also be considered:
- Total assets must be greater or equal to 20 million euros;
- Annual turnover is greater than or equal to 40 million euros;
- Their share capital is greater than or equal to 2 million euros.
Persons not included in preceding categories may request to be considered as professionals if they meet two of the following criteria:
- Having realised significant trades in capital markets, averaging ten per quarter during the last four quarters or alternatively a large enough number of trades in the relevant market;
- The value of cash and securities deposited is greater than 500,000 euros;
- The client has occupied, for at least one year, a professional position in the financial sector, requiring knowledge of operations or services provided.
If you wish to register as an investor and do not fulfil any of these conditions, please contact us.Register as a professional investor
- Total assets must be greater or equal to 20 million euros;
Bewater Funds has an investment policy published on bewaterfunds.com and available to all accredited investors on the website. Specifically, according to the following guidelines:
- Companies with high levels of growth that justify the existence of investment partners and at least 400,000 euros of sales in the last twelve months.
- A Shareholders Agreement that protects the interests of minority shareholders.
- Only companies that have sales of their products or services. It is not necessary for the company to have profits, but generally investments will be made in companies with positive cash flow or the ability to reach it with their existing cash.
- Companies with a valuation of less than 10x sales.
- Company stakes between 5% and 49%.
- Minimum investment is 300,000 euros.
These requirements are established with the objective of improving the protection of minority shareholders, as well as establishing adequate governance in the companies in which the Funds managed by Bewater Asset Management invest.
Bewater Funds can not offer any guarantee on investments made. The investor assumes all the risks involved in investing in companies with a recent and unconsolidated history. That is why we have decided that this product can only be acquired by investors with sufficient knowledge and experience involved with the investment.
The shares of SL (limited liability) companies in Spain are illiquid by nature because they are subject to preferred shareholder rights of the partners, entailing tedious procedures and authorisations (waiver of pre-emptive rights, call for general Shareholders’ meeting, etc.),that reduce the number of potential buyers. If the shareholders of a SL allow their shares to be acquired by a third party, it indicates a high price or that they simply allow the third party to do the work in order to establish a current market price for the shares. Shareholders can subsequently use their pre-emptive rights to acquire the shares themselves. This usually involves liquidity discounts between 25 to 50% on the market price.
Bewater Funds incorporates a Closed End Fund (CEF) for each company in which it invests. The shares of the fund will be offered to investors, previously registered on the website, who can put forward an expression of interest for the quantity and price of shares they wish to acquire. Once purchased, can express their interest in selling their shares though the website with a simple click. This is done without the limitations of pre-emptive rights or the need to call a general shareholders meeting.
Being invested in by Bewater Funds has advantages for the company:
- Lower financing costs than listing in an official market (listing a company in the MAB can cost more than € 300,000 and an annual cost of over € 100,000).
- Valuation of the company, endorsed by selection by the Asset Manager.
- Support from the Asset Management team to help grow the company.
- Possibility of simplifying the capital structure of the company, grouping several investors into a single Fund.
- Access to a new pool of investors who could meet future capital increases if necessary.
- The company can gain exposure of the investor universe.
- Availability of a vehicle to provide the investors in the company that want to exit or enterpreneurs that would like to diversify the risk liquidity
Investing through Bewater Funds has many advantages:
- Pre-selection of companies by the asset manager, composed of a team that has invested in more than 50 private companies.
- Follow up by the Asset Manager, who requires all SLs to have a shareholders agreement to protect the interests of minority shareholders.
- Possibility of investing in a single fund, or diversifying through investments in multiple funds.
- Shareholders of CEF can express their interest in selling their shares though the website with a simple click.
- Commissions up to 74% lower than an average Spanish venture capital fund: Fees.
- High level of skin in the game by the management team, who invest at least 20% of every fund at the incorporation
The following risks, among others, are assumed with the acquisition of Shares of the Fund that entail economic rights to a company:
- Market risk: consisting of the depreciation of the market value that the shares may experience during the time of being a shareholder of the Bewater Funds, and up until the sale of the shares to a third party.
- Liquidity risk: consisting of the difficulty in finding a buyer for the Assets or their shares.
- Counterparty risk: Consisting of the delay in the acquisition of the Assets, or even upon the lack of payment of total or partial disposal thereof.
- Risk of non-compliance: with the restitution of contributions or payment of dividends, interest or principal by the Investee.
- Risk of lack of diversification: the investor may choose to invest in a single fund, but it is advisable to invest in more than 10 funds.
- It is possible to lose all the money invested in a fund, so it is advisable to diversify.
- The Asset Management Company invests 0.5% of each fund at fund constitution and generally puts its shares up for sale after two years.
- The Bewater Funds management team takes at least 10% in the constitution of the fund. Over time, you can reduce your position in the fund by expressing your interest to the Asset Management Company.
- If units are subscribed after the constitution, it may happen that at the time of liquidation of the fund some shareholders gain and others lose, due to the different subscription price of each one. The Asset Management Company may be forced to sell at an undesirable price because it usually signs a drag along clause whereby, in general, 51% of the capital of a company can drag along the other partners. This is done to make it easier for companies to sell themselves, but sometimes we will be dragged against our opinion. In addition, the Asset Management Company must act in the best interest of the majority of the fund's capital, so it could vote to sell a company in which the majority of the fund's capital gains and a minority % of the fund's capital loses.
- The management company can be hired to intermediate the sale of shares subscribed in a fund, but there is no guarantee that a counterparty will be found for it.
- The funds have no fixed end date. Therefore, on the one hand, they can remain in a company's capital for a long time, which is often a positive situation, but can lead to illiquidity over a very long period of time. However, all the companies in which the Asset Management Company invests are intended to be sold.
The initial process of purchasing the shares of a company by Bewater Funds and the subsequent purchase of participating shares containing economic rights is very simple:
- The owner of the company’s shares offers them to Bewater Funds at a maximum price. To do this, please contact us.
- The company whose shares are being sold is requested to sign a contract for the release of information, and we usually also ask for a waiver of the current shareholder prefered acquisition right over the shares for sale.
- Then, Bewater Funds prepares a report based on the information provided by the company that is published on our site. Here’s an example.
- The shares are offered for sale on bewaterfunds.com. Expressions of interest can be collected over a fixed period, between 3 and 90 days, during which investor’s offers (price and quantity) are registered.
- After this time, if there is enough interest, the offer is closed.
- If the sellers have not previously renounced their prefered acquisition rights (usually they have done so), the remaining partners will be notified and given X days (according to bylaws, shareholder agreements, or the law) to exercise their pre-emptive acquisition rights.
- Bewater Funds will pay investors future profits of the shares at the time they occur, both dividends and capital gains.
The CEFs that constitute Bewater Asset Management are subject to corporate tax. This means that any income obtained by the CEF, no matter the origin, will be subject to corporate tax in Spain.
However, in accordance to article 21.1 of the LIS, dividends received by the CEF from the TARGET in which it participates will be exempt from paying corporate tax provided that the following requirements are met:
That the percentage of participation in the capital or equity of the TARGET is at least 5%, or that the acquisition value of the participation exceeds 20 million euros.
That uninterrupted participation in the company has been maintained during the year prior to the distribution of benefits or, failing this, participation must subsequently be maintained to complete said term.
Additionally, section 3 of article 21 states that positive income obtained in the transfer of participation in an entity will be exempt, when the aforementioned requirements are met. However, we must point out that this exemption will only be applicable when the participation requirements (5% or 20 million euros or more, of acquisition value) and minimum holding period (1 year) are met on the day of the transmission.
Generally, the fund manager will seek investments of more than 5% in companies. Maintaining participation for a period exceeding one year so as not to be taxed under corporate law, neither for capital gains nor for dividends.
A shareholder of the CEF, a natural person and fiscal Spanish resident, who transfers their shares.
The transfer of shares in the CEF provokes a capital gain for the purpose of the income tax law. This capital gain or loss, subject to the income tax law, must be included in the taxable savings amount. In this sense, the income tax law establishes that patrimonial gains or losses will be taxed according to the following table:
Tax brackets on Capital Gains Applicable marginal tax rate