On 20th May 2020 the Government launched the Future Fund, a bailout scheme designed to support UK based start-up businesses to mitigate the effects of the coronavirus pandemic on the tech, life sciences and creative industries sectors.
Future Fund Expansion?
The Government initially announced that £250m of investment money would be available; however, the Treasury Department has suggested in recent days that the Future Fund will be expanded further. This indeed seems to be the case as the government has already exceeded its initial funding pot by approving over £320m in loans.
Future Fund; Long Term Support
The Fund, which is designed as a more long term support package for businesses than some of the coronavirus response schemes already rolled out by the government (such as the Coronavirus Business Interruption Loan Scheme and Job Retention Scheme) that operates by providing loan funding in return for an equity stake in the participating business. These convertible loans will range between £125,000 to £5m and must be matched by venture capital funds, business angels or other private investors with an amount at least equal to the government’s contribution.
How do I qualify for Future Fund Investment?
To incentivise investors to contribute to businesses looking to take advantage of the scheme, the Government has promised to amend the rules on the Enterprise Investment Scheme (EIS) which provides tax relief to investors in high growth firms. This would allow some investors to claim relief on previous investments made before any investments through the Future Fund. It should be noted that angel investors will not be able to benefit under EIS due to the funding being provided via a convertible loan.
To qualify for Future Fund, your business must:
- be the parent company in your corporate group;
- have raised at least £250,000 in equity investments from third-party investors in the last five years;
- not have any shares which are traded on a regulated market;
- have been incorporated on or before 31st December 2019;
- have either half of its employees based in the UK or have earned at least 50% of its revenues from UK sales.
At the first stage of the roll-out of the Future Fund, a business needed to be UK registered however the rules have since been relaxed to ensure that firms who have moved their headquarters abroad can still access the scheme.
Any company which seeks to participate in the scheme must identify a lead investor to submit the application on its behalf. This is, therefore, an investor-led process and investors will need to make separate applications for each company which it is leading a proposed investment for.
Participating businesses and investors will also need to be aware that any funds paid by the scheme to successful applicants will need to be handled through nominated company solicitors via their client accounts.
We're here to help
If you would like further advice in relation to the Coronavirus Future Fund, please call 0161 941 4000 and ask for our Corporate/Commercial Department or email lawyers@myerson.co.uk