The Government and British Business Bank have now released some much needed clarity on eligibility criteria for the Future Fund, the application process and timing. Key points to take away are:

– The scheme will open for applications on 20 May 2020.

– Applications will be investor led meaning that the lead investor makes the application in connection with the eligible company and on behalf of any other investors. Investors are only eligible if they all fall within one of the following categories:

  • an "investment professional" within the meaning given to that term in article 19 of the FPO;
  • a high net worth company, unincorporated associated or high value trust falling within article 49(2) of the FPO;
  • a "certified sophisticated investor" or a "self-certified sophisticated investor" within the meaning given in articles 50 and 50A respectively of the FPO;
  • a "certified high net worth individual" within the meaning of article 48 of the FPO;
  • an equivalent professional, high-net worth, institutional or sophisticated investor in accordance with applicable law and regulation in such investor's home jurisdiction;
  • an association of high net-worth or sophisticated investors within the meaning of article 51 of the FPO;
  • capable of being classified as a "professional client" within the meaning given in the glossary to the FCA Rules.

– The eligibility requirements for applicant companies have also been updated:

  • a new requirement that the applicant company must have been incorporated prior to 31 December 2019 has been added;
  • the meaning of 'substantive economic presence' has been clarified as meaning that at least one of the following must be true for the company: half or more employees are UK based or half or more revenues are from UK sales;
  • the previously raised external funding of £250,000 must have been raised in the period 1 April 2015 to 19 April 2020 (inclusive) and must have been an issue of shares for cash consideration to a third party investor. Third party investors are defined as investors other than any founder, employee, worker, consultant or their connected parties. However, investment from non-executive and investment directors and from third-parties who appoint an 'investor director' can count towards the £250,000 raised, and will be eligible for match funding.

– AIM quoted companies do not qualify for the scheme, nor do companies with shares admitted to trading on any similar market, stock exchange or listing venue.

– The investee company cannot choose to repay the loan or repay it early. It will either convert into shares or be repayable in the specific circumstances outlined in the documentation: exit events, maturity or on default.

– No specific information has been provided with what information will need to be provided on receipt of the funding on an ongoing basis save that it has been confirmed that the Future Fund will require the same information that current shareholders receive and will require information to be submitted quarterly via an online portal for portfolio managing purposes.

– Advanced Subscription Agreements and historic Convertible Loan Notes will not qualify as matched funding and nor do they qualify as equity raised until they are converted into shares.

– Specific tax advice should be sought as to whether an investment will be SEIS or EIS compatible and/or whether it will prejudice prior reliefs.

Kathryn's previous article, 'Future Fund to support innovative businesses' can be found here.

This article has been produced for general information purposes and further advice should be sought from a professional advisor. Please contact our Corporate & Commercial team at Cleaver Fulton Rankin for further advice or information.

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