When Should You Use an Informational Memo for Business Capital Raising in Australia?

Thinking about raising capital for your business? An information memorandum (often called an “IM” or informational memo) can help you present your opportunity clearly, manage legal risk and build trust with potential investors.

Whether you’re lining up your first seed round or preparing a larger private placement, investors will want a well-structured, transparent picture of your business and the terms of the offer. An IM does exactly that.

In this guide, we’ll cover what an IM is, when you should use one in Australia, what to include, the key legal rules (including common investor exemptions), and the supporting documents that keep your raise clean and compliant from day one.

What Is an Information Memorandum (IM)?

An information memorandum is a disclosure document you share with prospective investors (or lenders) before they commit funds. Its job is to help investors assess the opportunity on an informed basis and to put your offer on a clear, professional footing.

It’s different from an internal business plan. A business plan focuses on strategy and operations for your team. An IM is outward-facing and covers the facts a prudent investor needs to know about your business and the terms of the offer.

What an IM Usually Covers

• Company background and structure, products/services, and key people
• Market overview and competitive landscape
• Financial information (historic results, forecasts and key assumptions)
• Details of the offer (e.g. ordinary shares, preference shares, convertible notes, or debt)
• Rights attaching to the securities and key terms (governance, anti-dilution, exit mechanics)
• Material risks and how you’re managing them
• Legal and regulatory considerations relevant to the offer
• How to participate and who to contact with questions

You might also hear the IM described as an “offer document” or “private placement memorandum” in a private capital raise context. The labels can vary, but the purpose is the same: give investors a clear, fair picture of the business and the securities on offer.

When Do You Need An IM For Capital Raising in Australia?

Not every funding scenario requires a full IM. But as a general rule, the more external and arm’s-length the investors (and the larger the amount being raised), the more important a professional IM becomes.

Situations Where an IM Is Strongly Recommended

• Raising funds from external investors you don’t know personally (angels, VCs or family offices)
• Issuing new equity or notes to multiple investors under a private placement
• Seeking bank or institutional debt funding that triggers formal due diligence
• Running a growth or bridge round where investors will compare your offer side-by-side with others

For a very small friends-and-family round, you might opt for a shorter investor brief. But once you have multiple incoming investors (especially if they’re sophisticated or professional investors), an IM helps you answer common questions upfront, reduce back-and-forth, and present the opportunity consistently.

If you’re mapping out your round and want to set clear commercial guardrails early, a concise, deal-level term sheet can sit alongside your IM and keep everyone aligned before you proceed to formal documents.

What Should Your IM Include?

Your IM should be factual, balanced and specific to your business. Tailor the depth of detail to your stage, sector and investor audience, but make sure you cover the essentials.

Essential Sections

• Executive summary: A one-page overview of the business, traction and the offer (what you’re raising, what securities, use of funds).
• Business model and operations: What you sell, how you make money, distribution channels, key suppliers and systems.
• Team and governance: Founders, leadership, advisors and board structure.
• Market and competition: Target customers, market size, trends, competitors and your edge.
• Financials: Historic performance (where available), forward projections, underlying assumptions and key metrics.
• The offer: Security type (e.g. ordinary shares, preference shares, convertible notes), pre/post-money valuation, price, rights and obligations.
• Capitalisation: Current cap table and pro forma cap table post-raise (including ESOP and any convertible instruments).
• Risks: Clear disclosure of material risks (market, execution, regulatory, key-person, IP, funding and dilution).
• Legal and regulatory considerations: High-level explanation of the fundraising pathway and investor eligibility (e.g. exemptions relied on).
• Process and timetable: How to participate, proposed closing date, conditions precedent and investor communication channels.

Make accuracy your priority. If something is uncertain or subject to change, say so plainly. Avoid promotional puffery-investors (and their advisors) will spot it and it can create unnecessary risk.

Key Legal Rules And Investor Exemptions To Know

Fundraising in Australia is primarily governed by the Corporations Act 2001 (Cth). The big picture is simple: public offers generally require a formal disclosure document (such as a prospectus), while many private offers can rely on specific exemptions. Your IM typically supports a private offering relying on those exemptions-it’s not a prospectus.

Common Private Offer Exemptions

• Small scale (personal) offers: Often called the “20/12/$2m” rule, this exemption generally permits offers to no more than 20 investors in any 12‑month period, raising no more than $2 million in that period, provided offers are personal and not advertised.
• Sophisticated investors: Investors who meet certain wealth or income thresholds (e.g. a qualifying accountant’s certificate) can receive offers without a prospectus. See the overview of section 708 exemptions for how this typically works in practice.
• Professional investors: Institutions and certain licensed or large investors fall into this category and are commonly approached under private placements.
• Existing shareholders or senior managers: In some scenarios, further offers to existing holders or offers to senior managers may be exempt.

Your IM should explain-at a high level-which pathway you’re relying on and who the document is intended for. It should not be distributed broadly if you’re relying on private offer exemptions.

Misleading or Deceptive Conduct

When you’re offering securities, misleading or deceptive conduct is prohibited under the Corporations Act (for financial products) and the ASIC Act. In simple terms: don’t overstate performance, don’t hide material risks, and ensure your assumptions are reasonable and explained. Balanced disclosure in your IM is one of the best safeguards.

Privacy And Confidentiality

If you’re collecting potential investor details or running a data room, you’ll likely need an appropriate Privacy Policy and sound data handling practices. It’s also common to share the IM and data room access after a candidate signs a short, plain-English Non-Disclosure Agreement.

How To Prepare And Share Your IM Safely

The process is straightforward if you break it into steps. Give yourself enough time to gather accurate inputs and to sanity-check the final document.

1) Assemble Your Inputs

• Recent management accounts and any available audited or reviewed financials
• Unit economics and key metrics (e.g. ARR/MRR, CAC, LTV, churn, gross margin)
• Updated cap table and any outstanding instruments (notes, SAFEs, options)
• Market analysis, customer insights and pipeline pipeline evidence (where relevant)
• Regulatory licences or approvals that are material to operations

2) Map Your Disclosures

List the material facts and risks a reasonable investor would need to know. This might include dependency on a major customer, key-person reliance, pending IP applications, supplier concentration, funding runway, or regulatory change risk. Build these into the IM in plain English so they’re clear and not buried.

3) Draft With Clarity (And Balance)

Keep the tone factual and measured. Avoid marketing language. Explain your forecast assumptions and note the limits of any forward-looking statements. If you include case studies or pipeline examples, label them clearly.

4) Add Appropriate Notices

Include standard notices about who the IM is intended for, the nature of the offer (private, not a prospectus), and that the document is not personal financial advice. If you are relying on a specific exemption pathway, state that at a high level in your eligibility or “Offer Restrictions” section.

5) Legal Review And Update Cycle

Have the document reviewed for accuracy and consistency, and ensure it aligns with your chosen fundraising pathway. If anything material changes (e.g. a loss of a major customer, updated forecasts), update the IM and version-control your distributions.

6) Distribute Securely

Share the IM only with vetted investors who fit your eligibility criteria. Use a secure data room or controlled PDF, apply watermarking if you wish, and keep a log of who received what and when. Requiring a signed Non-Disclosure Agreement before sharing is standard practice.

Supporting Documents To Run A Clean Raise

An IM is one part of a well-run raise. You’ll usually need a handful of core legal documents to capture the deal and keep governance tidy.

• Term Sheet: A short document that sets out headline deal terms (valuation, amount, security type, investor rights). It helps align expectations before detailed docs are drafted.
• Share Subscription Agreement: Records the number of shares, price, warranties and completion mechanics for an equity round. For notes, you’ll use the relevant note agreement instead.
• Shareholders Agreement: Governs decision‑making, share transfers, founder vesting, dispute resolution and exit scenarios-essential where you have multiple owners.
• Company Constitution: Check that your constitution supports the type of securities you plan to issue (e.g. preference shares) and any investor rights you’ve agreed.
• Non‑Disclosure Agreement: Protects confidential information when you’re sharing the IM and data room access during due diligence.
• Privacy Policy: Required if you collect personal information from investors (for example, via an expression-of-interest form or data room access request).

If you’re considering a structured alternative (for example, crowd‑sourced funding, a convertible note, or SAFE‑style instruments), the documentation and disclosure approach will vary. The core principle stays the same: keep disclosure balanced and make sure documents and company settings (like your constitution and cap table) align with the instrument you’re using.

Practical Tips To Strengthen Your IM

• Lead with clarity: State the amount you’re raising, the instrument, and the primary use of funds early in the IM. Investors shouldn’t have to hunt for the “ask.”
• Explain unit economics: Show how growth translates to margin improvement or cash flow, and be clear about key levers (pricing, churn, sales cycle).
• Own your risks: Transparent risk disclosure builds credibility and reduces legal risk. If a risk is material, say so and explain your mitigation strategy.
• Align your story and your data: Ensure numbers in your deck, IM and data room reconcile. Consistency speeds up diligence and avoids red flags.
• Version control: Date and number each version and keep a register of distributions and investor Q&A clarifications.

Frequently Asked Questions About IMs And Fundraising

Is an IM the same as a prospectus?

No. A prospectus is a formal disclosure document required for public offers. An IM typically supports a private placement that relies on exemptions from prospectus disclosure. It still needs to be accurate and balanced, but it’s not a prospectus.

Do I always need an IM?

Not always. Very small, closely held raises might proceed with a short investor brief and direct communication. However, once you’re inviting multiple outside investors, an IM is best practice and helps you manage risk and run a professional process.

Can I send my IM to anyone?

No. If you’re relying on private offer exemptions (such as those under section 708), you should only send your IM to eligible investors and avoid general advertising. Keep careful records of who you share it with.

What if my forecasts change?

Update your IM if there are material changes and re‑circulate as needed. It’s important that investors have up-to-date information before they invest.

Key Takeaways

• An information memorandum is a clear, balanced disclosure document used in private capital raises to help investors assess your business and offer.
• Use an IM when you’re raising from external investors or running a private placement-especially where multiple investors are involved.
• Cover the essentials: business model, team, market, financials, offer terms, cap table and risks, with plain‑English explanations and reasonable assumptions.
• Understand your legal pathway: most IMs support offers relying on exemptions (e.g. small‑scale or sophisticated investor exemptions) rather than a prospectus.
• Distribute your IM securely to eligible investors, keep records, and refresh the document if anything material changes.
• Support your IM with clean documentation such as a term sheet, Share Subscription Agreement, Shareholders Agreement, Company Constitution checks, NDAs and a Privacy Policy where relevant.

If you’d like a consultation on preparing your information memorandum and structuring your capital raise in Australia, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.