The private equity arm of the Midnight group is Tecate Northern Trust (the “Fund”). This unique Fund believes that private corporations drive the economy and are centers of innovation. The objective of the Fund is to make long-term equity investments in attractive private corporations and to build relationships with successful entrepreneurs.
The Fund generally operates through two stages: investigative and investment. In the investigative stage, the Fund first makes shorter-term investments by purchasing non-voting redeemable preferred shares to provide a low-risk opportunity for the Fund, the corporation and the other shareholders to evaluate whether a long-term equity investment by the Fund is desirable. Our unique two-stage investment method enables shareholders to realize some liquidity swiftly because the most onerous parts of the due diligence process are undertaken in the second stage of the transaction process.
The capital gains exemption was put in place to promote risk-taking and investments in private corporations. Entrepreneurs that have taken such risk may now wish to take advantage of this exemption by selling preferred shares to their corporations to the Fund for tax-free proceeds as part of the investigative step referred to above.