Imagine your dairy farmer neighbour offers you an opportunity to buy a stake in his company, MilkMade Pty Ltd. MilkMade makes dairy products and sells them to supermarkets here and overseas. Your investment will be $500,000, which will initially be used to pay off part of MilkMade’s net debt of $740,000. Then the company will roll out three new projects that will reposition its product range upmarket.
Early in the documentation, you read that you’ll receive the same distributions as your neighbour. So far, so good. But as you continue along, several concerns make you wary.