The Conflict of Interest Policy describes the possible conflicts of interest that have been identified by Spreds and how Spreds will deal with these conflicts of interest, if any. This policy is reviewed annually.
This document has 6 main sections:
- Definition of a conflict of interest under Belgian law
- Conflicts of interest within Spreds
- Conflicts of interest between specific persons within Spreds and project owners
- Conflicts of interest between Spreds and project owners
- Conflicts of interest between Spreds and investors
- Conflicts of interest between project owners and investors
1. Definition of a ‘conflict of interest’ under Belgian law
Article 7:96. § 1 of the Companies and Associations Code defines a conflict of interest in a public limited company as follows:
“When the board of directors is called upon to take a decision or to decide on a transaction falling within its competence in respect of which a director has a direct or indirect interest of a proprietary nature which is opposed to the interests of the company, that director must inform the other directors thereof before the board of directors takes a decision. His declaration and explanation of the nature of the conflicting interest should be included in the minutes of the meeting of the board of directors which is to take the decision. The board of directors may not delegate its decision.”
A conflict of interest therefore only exists if the following elements are present:
- a decision has to be taken by the board of directors or the board has to decide on a transaction;
- one of the directors has an interest (direct or indirect);
- which is of a proprietary nature; and
- is contrary to the interests of the company.
Given this definition, Spreds is of the opinion that there are only a limited number of situations that could constitute a conflict of interest under Belgian law. Nevertheless, we have included certain situations for which mitigating measures have also been provided, as these situations could be perceived as conflicts of interest and/or have been referred to in Regulation (EU) 2020/1503 of the European Parliament and of the Council of 7 October 2020 on European providers of participatory finance services for entrepreneurs, and amending Regulation (EU) 2017/1129 and Directive (EU) 2019/1937.
2. Conflicts of interest within Spreds
2.1. Conflicts of interest within the board of directors
2.1.1. Description of the situation
The board must decide on a transaction where the other party is a director (or a company controlled by a director) of Spreds, such as the sale of an asset held by Spreds to one of the directors.
2.1.2. Concrete examples
- sale of a car;
- loan agreement between a director of Spreds and Spreds.
2.1.3. Description of the conflict of interest
It is in the director’s interest to set the highest possible price if they sell or the lowest possible if they buy. This is therefore a proprietary interest. Furthermore, Spreds’ interest is opposed to the interest of the director concerned: it wants to set the lowest possible price if it buys and the highest possible if it sells. Finally, the decision is taken at the level of the Spreds board of directors, on which the director concerned could and should in principle vote.
2.1.4. Mitigating the conflict of interest
In this case, Spreds will follow the provisions of article 7:96 § 1 of the board of directors.
Thus, the director concerned is obliged to inform the other directors of the conflict of interest before the board of directors takes a decision. Their declaration and explanation of the nature of the conflicting interest should be included in the minutes of the meeting of the board of directors which is to take the decision.
The board of directors shall describe in the minutes the nature of the decision or operation in question and the financial consequences for the company and shall justify the decision taken, in particular by indicating how the operation is in the interest of the company and how it complies with the conditions and guarantees normally provided by the market for operations of the same nature. This part of the minutes is included in its entirety in the management report or in an exhibit that is filed together with the annual accounts. In addition, the minutes of the meeting shall be communicated to the auditor of Spreds. In his report referred to in article 3:74 of the board of directos, the auditor shall assess in a separate section the financial consequences for the company of the decisions of the board of directors, as described by the board of directors, in which there is an interest.
The director with a conflict of interest may not take part in the deliberations of the board of directors concerning these operations or decisions, nor may they take part in the vote on this point.
Where all directors have a conflict of interest, the decision or transaction is submitted to the general meeting; if the decision or transaction is approved by the general meeting, the administrative body may execute it.
2.2. Operations that do not fall within the competence of the Spreds board of directors
2.2.1. Description of the situation
Spreds concludes a contract with a partner, supplier, client, controlled by a director of Spreds. Example: PrivateLending SA, concerning the cooperation between Spreds and PrivateLending for projects based on loans to small and medium-sized companies. Spreds will, among other things, call upon PrivateLending for the analysis of the repayment capacity of the borrowing company.
The CEO of PrivateLending is Benoît Fally, who is a director of Spreds.
2.2.2. Situation likely to undermine client confidence
Even if the decision is not taken at the level of the Spreds board of directors, it could be considered that a situation exists that could affect the impartial and objective exercise of Spreds’ functions and, as such, undermine the trust that clients may have in good management, which is a situation that can be perceived as a conflict of interest.
2.2.3. Mitigating the conflict of interest
The negotiation of contractual terms and conditions is the responsibility of the CEO (and the Management Committee). Therefore, this situation is not discussed at Board level and the director concerned does not have to take a decision.
In addition, contracts with all Spreds’ suppliers are negotiated on market terms and conditions and if a commercial reduction outside market standards were to be granted, it would be subject to the advice of the Risk Committee.
2.3. Managing conflicts of interest or risk situations
It should be noted that the rules below apply to persons with a conflict of interest. If that person is required to make decisions that would result in a conflict of interest, they are replaced by the Legal & Compliance Officer (including if it is a director or the CEO who is affected). If the Legal & Compliance Officer is the person concerned, the CEO replaces them.
2.3.1. Procedures to prevent or control the exchange of information between relevant persons engaged in activities involving a risk of conflict of interest where the exchange of such information may adversely affect the interests of one or more clients
In general, and apart from what is described below, in individual cases there are very few situations where the exchange of information may be detrimental to the interests of one or more clients. Crowdfunding, like financial markets in general, must be transparent. The platform should therefore ensure transparency, as far as possible, and should therefore put in place procedures for the exchange of information between relevant persons to achieve this transparency (in particular to enable investors to make an informed investment decision).
In the rare cases where this exchange of information could be detrimental to a client, the procedure for preventing or controlling this exchange is described below in the special cases.
2.3.2. Separate supervision of relevant persons whose main functions are to carry out activities on behalf of, or provide services to, clients whose interests may conflict, or who otherwise represent different interests that may conflict, including those of Spreds
In general, and in addition to what is described below, in individual cases most people within Spreds are managing a specific aspect of the process of getting a campaign online through to closure. They act in the interests of both clients (project owner and investor), ensuring transparency of information. Each task is the exclusive responsibility of one person, who assumes responsibility under the supervision of the Legal & Compliance Officer for all essential elements in the interest of the clients (notably transparency of information). As the team is small, ultimate supervision is provided by the CEO.
2.3.3. Elimination of any direct link between the remuneration of relevant persons primarily engaged in one activity and the remuneration of, or income generated by, different relevant persons primarily engaged in another activity, where a conflict of interest may arise in relation to these activities
Each person is always remunerated (including variable remuneration) on the basis of their own activities and not on the basis of the activities of other relevant persons.
2.3.4. Measures to prevent or limit the exercise of inappropriate influence by any person on the way a relevant person provides crowdfunding services
In general, and in addition to what is described below, in individual cases, each person manages his or her part of the process, in relative autonomy. Every important decision regarding the crowdfunding process is taken by the relevant committees. The Legal & Compliance Officer is the person to whom people can turn if they feel influenced. The Legal & Compliance Officer can themselve, if they feel influenced, turn to the CEO, the Risk Committee or another independent director.
2.3.5. Measures to prevent or control the simultaneous or sequential involvement of a relevant person in separate crowdfunding services where such involvement may adversely affect the proper management of conflicts of interest
In general, and in addition to what is described below, in individual cases, Spreds believes that there are only exceptional situations where the involvement of a relevant person in sequential or simultaneous activities could undermine the proper management of conflicts of interest. This is because each element of the process is the responsibility of a different person, each decision is made by a committee and clients are always in control of their decisions (including asset sales, which are decided by investors).
3. Conflicts of interest between specific individuals within Spreds and project owners
3.1. A Spreds administrator or team member launches a campaign
3.1.1. Description of the situation
A Spreds administrator or team member may want to launch a campaign on the Spreds platform.
3.1.2. Situation likely to undermine client confidence
Even if the decision is not taken at the level of the Spreds board of directors and there are no conflicting interests of a proprietary nature, it could be considered that a situation exists that could impair the impartial and objective exercise of Spreds’ functions and, as such, undermine the trust that clients may have in good management, which constitutes a situation that can be perceived as a conflict of interest.
A specific prohibition applies under Article 8.2 of Regulation (EU) 2020/1503. Indeed, this article provides that Spreds may not accept as holders of projects in connection with participatory finance services on its participatory finance platform any of the following persons:
- a) its shareholders holding 20% or more of the share capital or voting rights;
- b) its managers or employees;
- c) any natural or legal person linked to those shareholders, managers or employees by a control relationship within the meaning of Article 4(1)(35)(b) of Directive 2014/65/EU.
3.1.3. Mitigating the conflict of interest
It is strictly forbidden for any person employed by Spreds or holding a mandate within Spreds to submit a project for funding (which he/she controls) on the platform.
3.2. A director or employee of Spreds also holds a directorship in a company seeking to raise funds, prior to the campaign
3.2.1. Description of the situation
It is possible that someone within Spreds already holds, in tempore non suspecto, a directorship in a company and that this company subsequently wishes to raise funds through the Spreds platform.
3.2.2. Situation likely to undermine client confidence
It could be assumed that Spreds will favour this company by virtue of the link with the director. This would therefore constitute a situation likely to undermine the impartial and objective exercise of Spreds' functions and, as such, the trust that clients may have in good management is undermined, which constitutes a situation that may be perceived as a conflict of interest.
3.2.3. Mitigating the conflict of interest
The following measures have been designed to protect the interests of investors:
- The person in question within Spreds should not be involved in the decision to launch a campaign and - in a broader sense - should not have knowledge of the elements of the decision process;
- The person in question cannot validate the information to be sent to investors when there are decisions to be made (e.g. investment or sale decision) and a warning must be sent;
- The person in question within Spreds can also not be part of the subsequent decisions that may be taken with regard to the project owner after the end of the fundraising;
- It is explicitly brought to the attention of investors that a specific person within Spreds has a directorship with the respective project owner (e.g. in the key investment information sheet).
3.3. A director or employee of Spreds also holds a directorship in a company that is seeking to raise funds, after a campaign
3.3.1. Description of the situation
The case in question is where a project owner proposes to a person within Spreds to take up a directorship in the company.
3.3.2. Situation likely to undermine client confidence
It could be assumed that Spreds will subsequently favour this company by virtue of the relationship with the director. This could constitute a situation that could undermine the impartial and objective exercise of Spreds’ functions and, as such, undermine the trust that clients may have in good management, which is a situation that can be perceived as a conflict of interest.
3.3.3. Mitigating the conflict of interest
Spreds has issued a ban on taking on new mandates in a company financed by Spreds.
3.4. A director or employee of Spreds invests in a campaign organised by Spreds
3.4.1. Description of the situation
As a person involved in Spreds, one has access to many investment opportunities. It is therefore possible that someone involved in Spreds may wish to invest in one of these opportunities.
3.4.2. Situation likely to undermine client confidence
It could be thought that Spreds will favour this company by virtue of the relationship with the director or employee. This could constitute a situation that could undermine the impartial and objective exercise of Spreds’ functions and, as such, undermine the confidence that clients may have in good management, which is a situation that can be perceived as a conflict of interest.
3.4.3. Mitigating the conflict of interest
The following measures have been designed to protect the interests of investors:
- Individuals within Spreds who wish to invest must notify Spreds by email of their wish to invest, indicating the reasons for the investment (the elements that made them decide to invest), in advance, before the launch of the campaign;
- The Legal & Compliance Officer checks whether the draft key investment information sheet includes the information that led to the investment decision by the data subject and if not, the key investment information sheet is adapted to take account of these elements;
- The persons concerned are not involved in the decision to launch a campaign related to their investment;
This investment is made:
- through Spreds Finance;
- in a separate compartment (i.e. not the one intended for the public);
- The fact that a person within Spreds wishes to invest in a project cannot result in the public no longer being able to invest what is considered a standard amount for offers organised on the Spreds platform (i.e. approximately €250,000).
- The persons concerned cannot then hold executive positions in the target company (board of directors, management committee, …).
Once the investment has been made, the following rules apply:
- The persons concerned will be excluded from the discussions when decisions concerning the file in question have to be taken (in particular the launch of subsequent campaigns, the termination of campaigns, the evaluation of the satisfaction of the conditions precedent to the investment by Spreds Finance);
Concerning the general meetings for the holders of Participatory Notes:
- The general meeting for the separate compartment will always take place after the general meeting for the public compartment.
The Legal & Compliance Officer will analyse whether a conflict of interest could exist between the person related to Spreds and the investors of the public compartment.
- If the Legal & Compliance Officer concludes that a conflict of interest exists (e.g. if the vote is to approve a voluntary liquidation that would allow investors to still recover a small amount but would result in the loss of the pro rata Tax Shelter to which the person within Spreds would not be entitled), the separate compartment must vote in the same way as the majority of the public compartment.
- If there is no conflict of interest (for example in relation to a proposed sale of shares held by Spreds Finance following the exercise of a follow-on right) and the outcome of one compartment has no impact on the other compartment, the separate compartment may vote at its discretion.
- The persons concerned can help the company in which they have invested through Spreds Finance by providing contacts, assistance,… (role of business carrier). They can also be remunerated for their work, but only in cash (for an amount in line with the market) and to the explicit exclusion of remuneration that consists of shares (through a contribution in kind or a transfer of shares) in the company.
4. Conflicts of interest between Spreds and project owners
4.1. Description of the situation
After the realisation of a campaign, project owners send Spreds Finance (as shareholder or lender) decisions to be submitted to investors. These decisions could be in favour of the project owner but not in favour of the investors. Spreds might want to favour the interests of the project owner to preserve the relationship, for example, by hoping to manage a new campaign for that project owner.
4.2. Concrete examples
- The project owner wants to change the rights and/or economic situation of existing investors (and, in particular, to put them in a less advantageous position, for example by creating a preferential liquidation right which will not apply to existing investors);
- The project owner wishes to seek approval for an employee stock option plan which, when exercised, will result in dilution for existing shareholders.
4.3. Situation likely to undermine client confidence
The project owner may have a proprietary interest in certain decisions, but this is not necessarily opposed to the interests of Spreds itself, which, moreover, often does not have proprietary interests in such situations. However, there may be a conflict of interest vis-à-vis the investors. These conflicts are discussed below in sections 5 and 6.
For other situations, it could be considered that there is a situation that could impair the impartial and objective exercise of Spreds’ functions and, as such, undermine the confidence that clients may have in good management, which is a situation that can be perceived as a conflict of interest, even if the decision is not taken at board level and there are no conflicting interests of a proprietary nature.
4.4. Mitigating the conflict of interest
A measure has been taken to protect the rights and interests of investors. Spreds will organise a general meeting of the holders of the Participatory Notes at which the holders of the Participatory Notes will have the opportunity to take a decision that will be binding on Spreds Finance. If the urgency justifies it, Spreds Finance may have to take the decision itself. In this case, Spreds will provide a report to the investors communicating the issue on which a decision was to be made, the background (as given by the project owner), the decision taken by Spreds Finance and the considerations it took into account in reaching this decision.
5. Conflicts of interest between Spreds and investors
5.1. Description of the situations giving rise to the conflict of interest
There is a conflict of interest for Spreds whenever Spreds could receive a remuneration if the investors decide in a certain way, which is not necessarily in their own interest.
5.2. Concrete examples
- In a new round of funding that a project owner wishes to launch on the Spreds platform, but for which they impose a condition that existing investors waive their preferential rights. Spreds receives a fee for this campaign and some of the people involved receive a commission, which could lead them to influence investors to agree to waive their preferential rights when they will be diluted;
- Where the project owner informs Spreds of an exit offer for the shares held by Spreds Finance for noteholders, it is possible, depending on the return achieved by the investors, that compensation (carried interest) may be due to Spreds. Spreds may have to encourage an exit (to earn compensation more quickly) while investors may want to hold on to their holdings for longer in the hope of getting a better return or delay an exit to get more compensation; Conversely, if the amount received by investors from a proposed exit does not justify the payment of a carried interest to Spreds, Spreds may wish to influence investors to reject the exit, so that it can continue to receive its annual compensation paid by the project owner for managing its investors, when the exit may be in the investors’ interest
5.3. Mitigating the conflict of interest
In most of the cases described, the fees charged by Spreds are relatively low. This also applies to the commissions received by the individuals involved.
The carried interest is an element of alignment of interest between the investors and Spreds, except in very rare cases.
In all cases, Spreds Finance (and Spreds) does not make the decisions in question. They are always submitted to the general meeting of the holders of Participatory Notes as described above. This is therefore not a case of conflict of interest as such, but a risk of influencing the decision of the investors. For this reason, voting decisions (and the information accompanying them) are always monitored by the Legal & Compliance Officer. In 2022, there was an exit approved by the investors, without payment of carried interest to Spreds, demonstrating the independence that investors have in their decision making.
6. Conflicts of interest between project owner and investors
6.1. Conflicts of interest
6.1.1. Description of the situation giving rise to the conflict of interest
A conflict exists between a project owner (or more precisely, entrepreneurs or certain shareholders or lenders of a project owner) and its investors whenever the latter are called upon to decide on a decision that reduces or eliminates equality between the shareholders or lenders.
6.1.2. Concrete examples
- An exit opportunity (at a loss) may arise, when not all shareholders sell. It may be that the entrepreneur himself retains his shares. It is also possible that the entrepreneur sells his shares but, in the case of an exit (at a loss), is offered an employment contract by the potential buyer (e.g. a more mature company that wants to take over a start-up in which Spreds Finance has invested) for a certain period of time (and thus obtains job security);
- It is possible to plan a capital increase in which the pre-money valuation is not very advantageous for the investors in the previous round, but is for the entrepreneur (who has only invested in the first round(s) or who gets a bonus or salary increase or whatever if there is a capital increase with a minimum amount in subscriptions);
- An entrepreneur may also want to have a stock option plan approved for him and/or the employees which is disproportionately in their favour and therefore not in the interest of the investors.
6.1.3. Description of the conflict of interest
The above examples can be considered as conflicts of interest because they concern situations where entrepreneurs have a proprietary interest that is opposed to the proprietary interest of investors.
6.1.4. Mitigating the conflict of interest
Spreds is of the opinion that this is not a conflict of interest stricto sensu since the persons with opposing interests (on the one hand the entrepreneur and on the other hand the investors) are not in the same body where a decision has to be taken. In other words, the project owners (or other lenders or shareholders) and the investors decide independently. Rather, it is a negotiation to conclude a transaction between two economic operators.
This being said, Spreds will ensure transparency of information in order to allow clients (and in particular investors who are the recipients of the information provided by the project owner) to make reasoned decisions. Spreds will also explain the proposed scenarios and their consequences and, if necessary, comment on current market practice.
For example, Spreds might state:
- It is important for the company that this is done because…
- This is a market transaction…
- Beware, this transaction is not in your interest because you lose the benefit of the Tax Shelter…
6.2. Other situations that may be perceived as conflicts of interest
6.2.1. Description of the situation
Investment decisions made by investors are obviously in conflict with the project owner in terms of determining the valuation or the applicable interest rate.
6.2.2. Situation likely to undermine client confidence
Project owners have a clear proprietary interest in investments.
Spreds, for its part, receives a commission on any transaction made by an investor.
However, neither Spreds nor the project owner is involved in the individual investor’s decision.
Furthermore, Spreds does not offer advice or individual investment management and therefore cannot influence investors in their decision to invest. In this respect, Spreds can be considered as a marketplace. It should be emphasised that neither Spreds nor its team accepts any remuneration, discount or non-pecuniary benefit for the routing of investor orders to a particular participatory finance offer made on its platform.
Since there is a situation where project owners are likely to undermine the trust that clients may have in good management, the situation may be perceived as a conflict of interest with, in particular, a risk of deceiving or influencing investors, which needs to be regulated.
6.2.3. Mitigating the conflict of interest
That said, the decision to invest or not is made on the basis of the information available to investors. This information is submitted by the project promoter, who is responsible for it and must ensure that it is correct, clear and not misleading. Spreds must verify the completeness, accuracy and clarity of the information and make it available to investors.
In addition, project owner sign a series of declarations and warranties and the breach of one or more of these declarations entitles Spreds to compensation from the project owner, including for the benefit of investors.