Offer Exemptions Under The Financial Markets Conduct Act In NZ

If you’re raising money for your business (whether it’s for growth, product development, or simply keeping cashflow steady), you’ll quickly run into a big legal question: do we need to prepare a full disclosure document?

In New Zealand, many capital raises are regulated under the Financial Markets Conduct Act 2013 (FMC Act). The FMC Act can require formal disclosure (like a Product Disclosure Statement) and ongoing compliance obligations.

The good news is that the FMC Act also includes “offer exemptions” that may let your business raise capital without going through the full disclosure regime - if you meet the conditions and do things properly. That’s where most businesses need clarity.

This guide breaks down the key ideas behind offer exemptions under the Financial Markets Conduct Act, so you can understand what’s possible, what’s risky, and what steps you should take before you accept any investor money.

What Are “Offer Exemptions” Under The Financial Markets Conduct Act?

Under the FMC Act, offering “financial products” to investors can be a regulated offer. Financial products can include (among other things):

• Equity securities (e.g. shares in your company)
• Debt securities (e.g. notes, bonds, or some loan-type investments offered broadly)
• Managed investment products (typically where money is pooled and managed)
• Derivatives (more complex arrangements, often used in finance and trading)

If your raise is a regulated offer, you may need to comply with disclosure requirements, fair dealing rules, and (depending on the product) governance and reporting obligations. That can be time-consuming and expensive for a small business.

Offer exemptions are legal carve-outs that can allow offers in certain situations without full public-offer disclosure. In practice, they’re designed for cases where:

• the investor is considered sophisticated enough to not need full retail-style disclosure, or
• the offer is limited (in audience, relationship context, or other conditions), or
• the offer occurs through a regulated channel (like certain platforms) with its own protections.

When people look for information about offer exemptions under the Financial Markets Conduct Act, they’re usually trying to work out whether they can raise money from friends, family, customers, or private investors without preparing a full disclosure document.

Important: an exemption isn’t a “free pass”. You still need to follow the exemption conditions carefully, and you still need to avoid misleading or deceptive conduct (including under the FMC Act’s fair dealing rules and the Fair Trading Act 1986).

Do You Actually Have A “Financial Product Offer” (Or Just A Business Deal)?

Before you choose an exemption, it’s worth stepping back and confirming what you’re actually doing.

Many businesses assume they’re “just raising funds” - but the legal classification matters. For example:

• If you offer shares, you’re almost certainly offering a financial product.
• If you offer a convertible instrument (a loan that converts into shares), you may be offering debt and/or equity features, depending on the structure.
• If you take “investor funds” and promise a return tied to business performance, you may be creating an investment product even if you don’t call it that.

On the other hand, some transactions are more like standard commercial arrangements (e.g. a normal business loan from a bank, trade credit from a supplier, or customer pre-orders) and may not be “offers of financial products” in the same way - but you should still check the details.

If you’re planning any kind of investment round, it’s common to document the headline terms early using a Term Sheet. That can help everyone stay aligned while you confirm what compliance path makes sense.

Common Offer Exemptions NZ Small Businesses Use (And When They Fit)

There isn’t one single “best” exemption. The right pathway depends on who you’re offering to, how you’re marketing the raise, and how the deal is structured.

Below are some common offer exemptions (and exemption-style pathways) that NZ businesses often rely on. This is general guidance only - the eligibility rules and documentation requirements can be strict.

1) Offers To Wholesale Investors

A very common FMC Act approach is to limit your offer so it’s only made to wholesale investors (rather than the general public). “Wholesale” includes several categories, such as:

• Investment businesses (e.g. certain professional investment firms)
• Large entities meeting set thresholds
• Eligible investors who meet criteria and sign required certifications
• Habitual investors (people who regularly invest in financial products)

In simple terms: if your investors are genuinely sophisticated and qualify as wholesale, the FMC Act treats them differently to retail investors.

Practical tip: you need a process for verifying and recording the investor’s status (for example, collecting the right certificates or confirmations). If you “assume” someone is wholesale and they’re not, you can accidentally trigger a non-compliant regulated offer.

2) Offers To Close Business Associates (And Similar Relationship-Based Exemptions)

Some exemptions can apply where there is a close pre-existing relationship - for example, offers to:

• close business associates
• relatives
• certain close connections (depending on the specific exemption conditions)

These are often the exemptions people have in mind when they say “we’re just raising from friends and family” - but you still need to be careful. The relationship usually needs to be real and relevant, not something created just to fit within an exemption.

Practical tip: be cautious about marketing. Even if you intend to only accept money from people you know, broadly advertising the offer (especially online) can create compliance risk.

3) Employee Share Schemes

If you’re offering shares (or share options) to employees as part of remuneration or retention, there may be specific exemptions and pathways for employee offers.

Employee offers can still involve legal and tax considerations (and you should get tax advice specific to your circumstances), so it’s important to document the arrangement clearly and ensure it fits your company’s governance settings.

It’s also common to align these offers with your core company documents like a Company Constitution and a Shareholders Agreement, so you don’t create conflicts between what you promised and what your company rules actually allow.

4) Crowdfunding And Other Regulated Channels

Some businesses raise funds via regulated channels (such as licensed crowdfunding services). This isn’t the same as a simple private exemption, but it can be a way to raise from a wider group while following a prescribed framework.

This pathway usually involves additional preparation (offer materials, business information, platform requirements, ongoing communications). It’s not “no rules” - it’s “different rules”.

5) Small-Scale Private Raises (And Why “Keeping It Private” Isn’t A Standalone Exemption)

Many small businesses aim to raise a modest amount from a small number of investors and keep it private.

However, it’s important to be clear: the FMC Act doesn’t provide a general “small raise” or “private raise” exemption just because the amount is modest or the business isn’t advertising widely. Instead, you generally need to fit within a specific exemption category (such as wholesale investors, close business associates, or another recognised pathway).

Even where you think an exemption should apply, you still need to be cautious because:

• what counts as “public” can be broader than you expect (especially with online promotion), and
• the structure of the investment can create a regulated offer even if the raise is small.

This is one of the reasons it’s worth getting advice early - the “shape” of your raise (who, how, and what you’re offering) is often more important than the dollar figure.

How To Stay Compliant When Relying On An FMC Act Offer Exemption

Once you think an exemption applies, the next step is making sure you actually comply with it. This is where businesses can slip up - not because they’re doing anything dodgy, but because the admin and wording matters.

Here are practical steps we typically recommend you think through.

1) Control How You Communicate The Offer

Many FMC Act issues start with marketing. If you post on social media that you’re “seeking investors” and invite anyone to DM you, you may have created a broad solicitation - which can undermine a private/off-exempt offer approach.

Consider:

• who you’re communicating with (named individuals vs the public)
• what you’re saying (avoid promises or hype)
• where you’re saying it (private communications vs public advertising)

2) Get The Investor Qualification Evidence (In Writing)

If you’re relying on wholesale investor pathways (like eligible or habitual investor categories), you’ll generally need signed documents and confirmations to support that categorisation.

This is not just box-ticking - if there’s a dispute later, your records matter.

3) Align The Investment Paperwork With Your Structure

If you’re issuing shares, your company’s governance needs to support that issue. That includes:

• whether you need shareholder approvals
• what share rights attach
• how transfers are handled later
• what happens if a founder leaves

Depending on the raise, you may need more than one document. For example, you might use a Share Subscription Agreement to record the share issue terms, and update or enter into a shareholders arrangement to manage the relationship going forward.

4) Be Careful With “Convertible” Or “Hybrid” Fundraising

Startups and growth businesses often like raising through convertible instruments because it can feel simpler than pricing an equity round immediately.

But convertible structures can still trigger FMC Act considerations, and the drafting needs to be tight (conversion mechanics, valuation caps, discount rates, maturity dates, repayment rights, and what happens on insolvency).

If you’re going down this path, it’s common to use a tailored Convertible Note (or a similar early-stage instrument) so the legal and commercial positions are clear from day one.

5) Don’t Forget General “Fair Dealing” And Misleading Conduct Rules

Even where an offer exemption applies, you generally still need to ensure that what you say to investors is accurate and not misleading.

That means:

• don’t overstate revenue, traction, or pipeline
• don’t present forecasts as guaranteed outcomes
• be upfront about key risks (competition, regulatory approvals, dependency on founders, cashflow constraints)

It can also be sensible to prepare an information pack with careful wording and appropriate disclaimers. Depending on the context, an Information Memorandum Disclaimer can help frame your communications more safely (but it won’t “fix” misleading statements - it needs to be paired with accurate content).

What Are The Risks If You Get An Offer Exemption Wrong?

When you’re busy building a business, it’s tempting to treat compliance as something to “clean up later”. With fundraising, that can backfire.

If you rely on an FMC Act offer exemption incorrectly (or you don’t have evidence that you met the conditions), risks can include:

• Regulatory action (the FMA can investigate and take enforcement steps in some situations)
• Investor disputes if someone later says they weren’t properly informed or didn’t qualify for the exemption
• Unwind pressure (having to restructure, repay, or remediate the offer)
• Future capital raising friction (later investors may do diligence and pick up problems from earlier rounds)
• Founder and director stress (because these issues are rarely quick fixes)

It’s also worth remembering that fundraising often doesn’t happen just once. If you plan to grow, you may raise again. Getting your first round right helps you build a track record and a clean cap table.

From a practical angle, businesses often benefit from setting up the “rules of the relationship” early - including decision-making, share transfers, exits, and dispute pathways - which is exactly what a solid Shareholders Agreement is designed to do.

A Simple Step-By-Step Checklist Before You Accept Investor Money

If you’re not sure where to start, here’s a straightforward checklist you can use to pressure-test your raise.

Step 1: Confirm What You’re Offering

• Are you issuing shares, issuing a note, or doing another arrangement?
• Does it look like a “financial product” under the FMC Act?
• Are there any unusual features (conversion, revenue share, buy-back promises)?

Step 2: Decide Who The Offer Is For (And Keep It Tight)

• Is it wholesale investors only?
• Is it limited to close business associates/relatives?
• Will any employees participate?

Step 3: Map The Compliance Pathway

• Which specific exemption are you relying on?
• What evidence do you need to collect (certificates, signed confirmations, records)?
• What should you avoid saying publicly?

Step 4: Prepare The Documents

• Term sheet or headline terms for alignment
• Share issue or investment agreement (e.g. Share Subscription Agreement)
• Governance documents aligned to the raise (e.g. Company Constitution)
• Ongoing relationship rules (e.g. Shareholders Agreement)

Step 5: Sanity-Check Your Communications

• Is your pitch accurate and balanced?
• Are your financials and forecasts properly caveated?
• Do you have appropriate disclaimers in place where needed?

If you want tailored help choosing the right pathway, a capital raising consult can be a good way to get clarity early - before you’ve sent materials to investors or accepted funds.

Key Takeaways

• Offer exemptions under the FMC Act can allow NZ businesses to raise capital without full disclosure, but only if you fit within the exemption conditions and follow them carefully.
• The FMC Act’s offer exemption framework often depends on who you’re offering to (e.g. wholesale investors or close associates) and how you’re communicating the offer (private vs public).
• Even if an exemption applies, you still need to avoid misleading statements and keep your investor communications accurate and balanced.
• Good record-keeping matters - for example, collecting the right investor certificates and confirmations in writing.
• Your fundraising documents should align with your broader governance, including your Company Constitution and Shareholders Agreement, so your cap table and decision-making don’t become messy later.
• Convertible and hybrid fundraising can be useful, but it’s important to document the terms properly and check whether the structure creates additional FMC Act issues.

If you’d like help structuring a raise, choosing the right exemption, or drafting the documents, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.