Simmonds Stewart Challenges CMDT's views

Simmonds Stewart Challenges Capital Market Development Taskforce’s views on the Innovation Sector

Simmonds Stewart has released a white paper discussing the relevance of the Capital Market Development Taskforce Report to New Zealand’s innovation sector.

Andrew Simmonds, partner and co-founder of the Wellington-based commercial law firm, said, “While this is an important and useful report on the state of the investor markets in New Zealand, we do question some of the Taskforce’s recommendations intended to boost the contribution of the innovation sector to the country’s capital markets”.

Simmonds has responded with a public white paper that, among other points, makes a range of his own suggestions based on his firm’s broad experience with entrepreneurs, companies and investors who are active in the innovation, commercialisation and technology sectors:

1. Create and maintain a comprehensive online resource listing companies in NZ’s innovation sector, and recording deals involving those companies (better visibility of the success of the sector will encourage investment and other support for the sector)

2. Expand the training available to technology companies on the development of their businesses, particularly on offshore expansion and capital raising

3. Widen access to New Zealand Trade and Enterprise’s (NZTE) Beachheads programme

4. Consider widening Government funding of tech companies to cover IP investigation and protection costs

5. Simplify the tax rules that affect NZ innovation companies raising capital in offshore markets (the complexity of the current rules create unreasonable costs for early stage companies and tend to inhibit NZ entrepreneurs from investing alongside overseas investors)

6. Exempt small-scale employee share schemes from the Securities Act

7. Reduce the liability risks for independent directors of private companies, in order to increase the pool of experienced business people and executives willing to sit on the board of early stage/developing companies

8. Increase Government engagement with private sector participants in the sector, particularly those involved with early stage/high growth technology companies.

“It is undoubtedly important to increase the availability of capital for the sector, but I think the Taskforce put too much emphasis on growing innovation companies with NZ capital and upon listing on the NZX as the end goal,” says Simmonds. “In many situations, NZ innovation companies will be better served by offshore capital and, for mature and maturing companies, an offshore listing may be more effective. The NZ economy will continue to benefit as long as NZ founders, investors and employee shareholders are able to go along for the ride with that offshore capital.”

Simmonds’ white paper is available at http://www.simmondsstewart.com/Papers.aspx

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