The launch of the ecobond two by Ecotricity Group Limited to retail investors is a very positive development for UK renewables and proves that even with the financial crisis and tough bank lending conditions it is possible for UK businesses to get the funding they need. At Worldwise Investor we hope that this begins a trend in the market which others can follow, but we would like to see minor ammendments to the law to give both companies and investors a better deal.
Two changes I would like to see
Any company making a direct offer to the public like this should introduce an extra level of corporate governance in its processes prior to issuing bonds to the public. This should include the appointment of non-executive Directors to the Board, who are specifically mandated to be responsible to bond holders to ensure that the company remains in a position to pay back the unsecured loans it raises.
The terms of the loan cannot preclude an investor selling his, or her, interest in the bond to a third party at any time in the process.
I originally requested that the company accounts should be displayed prominently next to the offer document. I am pleased to say that these were by Ecotricity Group Ltd and I had simply not found them. The last five years sets of accounts are displayed and available and apologise to Ecotricity for this error.
My concern is that the contract on offer from Ecotricity leaves retail investors unrepresented and low on the list of creditors in the event of liquidation. I would like those who follow Ecotricity to think more about the rights they give to investors, in particular the right to sell their interest to a third party. These rights however cause regulatory and cost issues which companies want to avoid and so regulation is driving a worse deal for investors. Ecotricity Group Ltd have followed the King of Shaves and Hotel Chocolat into direct bond offers to investors, all of which set a dangerous precedent for other companies to follow. The lack of investor rights could ultimately lead to allegations of mis-selling and damage future financing for companies and in particular renewable companies, such as Ecotricity. A few sensible changes to the law which meet both company cost concerns and investors' rights might prevent a future scandal.
Mark Hoskin is a Partner at Holden & Partners. Holden & Partners are Chartered Financial Planners who provide financial advice to high net worth clients, the majority of whom have a significant interest in ethical or environmental issues.
Mark Hoskin graduated with a History degree from Keble College, Oxford and went on to become a Chartered Accountant with Price Waterhouse. He cofounded Holden & Partners in 2003 and is a Certified Financial Planner and Chartered Financial Planner. Holden & Partners set up Worldwise Investor to help both advisers and investors understand quickly and easily how they can benefit from ethical and environmental investment in the UK market.
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