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2015-05-xx PLT Taoudeni Resources |
- TR (consolidation & issue)
- Ive already highlighted some of the critical issues with the fuck-up
- many of these may seem small and yes maybe you can fudge away with doing those hack changes as incrementally proposed.
- But why do it if could be avoided.
- I just can’t understand what the logic is or was other than a pricing decision was made for the ‘investment’ and that price was also used as the ‘nominal price’ for class and because of this every decision since has been skewed by this.
- Because regulatory oversight tends to be fairly lax at the low end, then better than even odds of never being an issue.
- The flipside reality is international cross border tax is complex and expensive to seek advice to properly structure
- What frustrates me is that I’m pretty certain I have a lot less available time than NT, have gone out of my way several times to build out resources which I have always shared out (and mostly ignored, sometimes copied to somewhere else that i have no access to).
- Anyway the following are my addition and final thoughts on the key considerations relating to TD.
- The only thing i really need back is a copy of the complete share transfer form for the 212 shares.
- Plutus Considerations
- In assessing the potential tax for the current period;
- Three areas that Plutus needs to consider;
- VAT:
- Resolving to issue equity in lieu of cash is only the right to issue.
- A tax invoice will be required to be presented with VAT to be able to issue the stock
- I don’t know if Plutus has registered for VAT (from what Ive read VAT threshold is GBP79k).
- So cashflow is not impacted, the invoiced amount is settled in stock and the VAT paid in cash.
- GBP49k:
- While the intention of the issue is to rebalance between parties.
- The consolidation is a complete waste of the uplift that would have yielded from the initial subscription at 1p.
- The issuance of new shares (that cannot be issued for anything less than 80p requires some basis or rationale to issue them.
- So again, it requires a party to invoice for services, if that party is in the UK then it will attract VAT.
- If the services are provided by a foreign company but were provided in the UK then VAT & Income tax may be payable.
- value at less than 80pThe creates an entirely new tax obligation (again the above invoice + VAT applies).
- Equity for services
- In the folders shared out I noted there were additional shares to be issued to Plutus with an uplift of 1.6x.
- Again tax invoice to be provided and it would be at the 1.6x value.
- Taxable Value:
- its important to note that the deemed taxable value of the gains or income tax may be different than the 80p, particularly if discussions are being undertaken with 3rd parties based on a significantly higher valuation.
- Note:
- I did read that minority interests especially those under 10% would be valued at a lower value than the headline number (especially if there is inefficient liquidity to dispose of the shares (in the event that they had to be).
- In fact there appears to be various favourable scenarios that can be considered. What I have read myself and consider useful I've shared on Evernote (with more pdf’ to be coped into Plutus on drive)
- Assignment of Rights:
- I had always assumed that there was some formality around the assignment of the ‘Mauritanian opportunity’.
- Where the parties agreed to issue 'Plutus Group’ (Plutus and its associates)
- x Shares in consideration for the assignment
- x Shares in consideration for reimbursement of expenses.
- I would think there are various parties that have performed services and have sunk costs relating to Mauritania, per just requires thought on restructure accordingly.
- I’m certain there is quite a bit of information/documentation covering this kind of transaction.
- Rollover relief
- The rule of thumb (my understanding) to qualify for rollover relief (deferring the taxable event when shares are exchanged for other shares)
- is the securities have to be exactly like for like,
- if different securities are issued then this results in a deviation and provides the tax office the ability to tax that event.
- this also needs to be considered with issuance of options and performance shares.
- 80p par value
- this is possibly going to be an issue being rolled up into GoldCrap
- to get roll over relief it must be through the acquisition of the shares in the company (not an asset sale)
- If it requires like for like, then GoldCrap would need to issue 80p par value shares, which is not really appropriate going forward ,
- and you still have those hybrid non voting (ever) part paid performance shares that need to be considered.
- Hummingbird
- Not sure if they have even seen structure of what they are to take a 10% equity interest in,
- on one hand they might not give a shit (an indicator of this would be whether they prepared a shareholder agreement in addition to share sale, and if they did what share structure have they used)
- If Goldcrap deal goes forward
- It would probably be more preferable to them to have their interest crystallised in Goldcrap shares rather than into TD and then into GC.
- Especially if there is an imminent asset sale and a cap gains is crystallised as part of that proces
- This would fuck off the SPA argyy-bargy also avoid fucking around with shareholders agreement in TD.
Possible Structure with GoldCrap
Depending on the timing, this could all be swept up within the proposed acquisition.
Remember Gavin’s drivers are significantly different and probably in the short term he is looking to salvage multiple investments vs thinking about the consequences of doing so
- Goldcrap to acquire TD (or assets of TD)
- Ghana project
- rather than executing SPA as normally would be some alternative agreement that assigns to Goldcrap
- i.e they get 10% of the Consideration to be issued by GC.
- Mauratania project
- Agreement between TD + Plutus (facilitator = stock as agreed) + VendorCo (GBP50k or x% of consideration Note 1)
- Vendor Co would be Singapore/facilitators that originally brought the deal to Plutus (beneficiaries of may or may not include Plutus representatives).
- This would bypass the churn and associated issues of re-issue of stocks in TD.
- Facilitator:
- Plutus should act as facilitator of the deal, manage the vendors and acquiring co.
- The revenues earn from this process (retainer, fee’s and cost) should seek to cover the costs of operating in the UK and provide some additional working capital
- collectively with minimal and manageable tax consequences
- Acquisition CO:
- The vend and any implied or actual additional sweat should be factored into the ‘founder/vendor’ stock.
- Investments made into the ‘origination strategies’ can be appropriately structured to tax effectively preserve assets value
- PR/Perceived Value
- Typically when Ive structured these transactions historically, you look to squeeze some additional perceived value from the deal origination.
- The perceived value could be beefed up by having VendorCo also provide GolfCrap with first right of refusal for deal-flow within target jurisdiction
- i.e. Mauritania and adjacent countries for example;
- that copper project looked at in Morocco was a Hunton deal,
- obviously it didn’t get done through hunton in the end (Nex Metals that was funding it had an internal blowup),
- I also know the vendors didn’t get their next deal done (vendors russians and tough market). but Nex had paid EURO5k to commence DD but was put on hold.
- This could possibly be picked up again. Just an example of something that could be put forward
Risk Analysis:
- I don’t know what the expected uplift is to be but for something that is yet to be granted and only has an agreement that after certain expenditure and assessment of results whereby Anto may at their sole descretion take up their rights to spend a nominal amount).
- Other than the fact that Gavin’s investco has pumped in GBP50k, what other compelling drivers to keep the deal going
draft stuff
- Advisors
- Its easy to rely on one set of advisors over another.
- Lawyers don’t provide tax advice, and may not necessarily structure to maximise tax efficiency, especially if not aware of wider circumstances and requirements.
- Accountants may provide basic tax advice, but generally cross jurisdiction and Public could require specialist advice
- Tax experts will provide very specific (and very expensive advice),
- Mostly can’t go past transactional experience - who has led structuring and acquisitions in the target jurisdictions.
- (This is one reason I think it is important to create and maintain peer groups from the very first review of a project.
- For instance, a new ASX IPO always contains a solicitors report - which will provide current mines department rules and regs as well
- Doing business in;
- Find out which professional services groups have the most dominant position in the country and sector.
- Download the latest ‘doing in’ Annual. This provides a solid broad base to work from.
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