FAQs in relation to Maturity of Future Fund CLA

The Future Fund and the Other Lenders each have the right to elect to be repaid their Loan together with the Redemption Premium on the Maturity Date. Subject to where the Future Fund has agreed to grant an extension (see below for details), the Future Fund will elect to redeem all outstanding Loans where a company has not undertaken a Qualified Financing, Non-Qualified Financing round or an Exit transaction by the Maturity Date.

The Redemption Date is the date referred to in the CLA as the Maturity Date, being 36 months after the execution date of the CLA.

In the event of a redemption by the Future Fund on the Maturity Date, the principal Loan amount will be repaid to the Future Fund together with the Redemption Premium.

At Maturity, the Future Fund and the Other Lenders can decide separately whether to elect for Redemption or accept the automatic conversion. If the Other Lenders want to redeem their Loans, they must provide a Lender Majority election (being the holders of at least 50% of the Loans excluding the Future Fund) in writing no later than 30 business days prior to the Maturity Date. The Other Lenders act as a group, so if a Lender Majority elect to redeem their Loans, then all the Other Loans will be redeemed.

The Future Fund will elect to redeem its Loan regardless of the Other Lenders’ decision.

The redemption events are set out in section 6 of the CLA. A company cannot choose to redeem the Loans on a voluntary basis. The Loans will either convert into shares or be redeemed in certain circumstances, such as: specific Exit events; the Maturity Date of the Loans; or on an Event of Default by the Company.

The full amount of the Loan together with the Redemption Premium will be due and payable on the Maturity Date unless a Conversion Event transaction has legally completed prior to the Maturity Date or the Maturity Date has been extended (see section below on Extensions).

Failure to pay this amount in full is an immediate Event of Default and steps will be taken by Future Fund to recover the debt owing to it. Companies in this position (or which anticipate they will be in this position at the Maturity Date) should take professional advice from a qualified lawyer or insolvency practitioner. We are unable to provide advice ourselves.

The Future Fund will convert in the following conversion scenarios prior to maturity:

• Qualified Financing round where the size of the round is 100% or bigger than the CLA), please refer to our “What You Will Need Guide”
• Non-Qualified Financing round, either:
  1. Where the size of the round is between 25% and 100% of the CLA and a Lender Majority elects to convert the Loans, please refer to our “What You Will Need Guide”; or
  2. Small Non-Qualified Financing event (a “SNQFE”) where the size of the round is equal to or lower than 25% of the CLA: A SNQFE requires a Relevant Majority to elect to convert the Loans. The Future Fund is generally not minded to convert upon a SNQFE as the Future Fund considers that there is not real market validation for the conversion price in such a scenario. Should the company decide to put forward a request for the Future Fund to consent to convert following a SNQFE, a strong rationale would need to be provided together with information to explain why the round price is representative of the current company value. The Future Fund will then consider the relevant request in the context of the financial position of the company, the investment being raised and the rationale behind the request as well as the entity providing the new funding.
• Exit where there is (i) an arm’s length sale of the company, (ii) a sale of all or substantially all of the assets of the company or (iii) a listing of the company’s share on a recognised stock or investment exchange

The Future Fund will not agree to any voluntary conversion proposal. The Conversion Events in the CLA do not include a provision for a voluntary conversion either prompted by the company or the Other Lenders. Where a company has not undertaken either a Qualified Financing, Non-Qualified Financing round or an Exit transaction by the Maturity Date, the Future Fund will elect to redeem its Loan and will therefore not automatically convert at Maturity Date.

The Future Fund will issue a redemption notice no later than 10 business days prior to the Maturity Date. Should the company request it, the Future Fund will assess the opportunity to grant a grace period for the Redemption Date to allow for the completion of the transaction (Exit or Conversion upon QFE or NQFE). In any event such grace period will not be longer than 20 business days.

At Maturity, the Future Fund and the Other Lenders can decide separately whether to elect for Redemption or accept the automatic conversion. If the Other Lenders want to redeem their Loans they must provide a Lender Majority election (being the holders of at least 50% of the Loans excluding the Future Fund) in writing no later than 30 business days prior to the Maturity Date. The Other Lenders act as a group, so if a Lender Majority elect to redeem their Loans, then all the Other Loans will be redeemed.

The Future Fund will elect to redeem its Loan regardless of the Other Lenders’ decision.

The Future Fund will email the Company approximately 6 months ahead of Maturity Date requesting the Company confirms its intentions on Maturity (‘Maturity Notification email’). The Company should respond by a ‘Maturity Intention’ portal notification within 20 business days of the initial Maturity Notification email. If the Company wishes to request an extension the Future Fund will need sufficient time to consider any request for extension (see process details below).

Once you have responded to the Maturity Notification email the Future Fund will conduct several substantive checks before responding to confirm the outcome of the extension request or to request further information.

Please note that this process takes time and requests are prioritised based on Maturity Dates. The team will be in touch once the checks have been concluded.

In order to be considered for an extension to the Maturity Date, Companies will need to respond by submitting a ‘Maturity Intention’ portal notification as set out in the initial Maturity Notification email sent by the Future Fund within 20 business days of receiving the initial Maturity Notification email in order to notify the Future Fund that they intend to request an extension to the CLA’s Maturity Date. The Future Fund will review the ‘Maturity Intention’ portal notification’ and inform companies if they are eligible to submit a ‘Maturity Extension Request’ portal notification. Failure to respond by submitting a ‘Maturity Intention’ portal notification within the timeframe would mean that an extension request will not be considered, and the Future Fund would then elect to redeem its Loan at the Maturity Date.

The Future Fund will conduct a number of checks on the company and the Other Lender(s) (including KYB/KYC and AML checks) and review the ‘Maturity Extension Request’ portal notification.

If the extension request is approved, the company will need to provide a solvency statement (click to access) and the parties will need to formalise the variation by executing a deed of variation having received the signed and dated Relevant Majority consent (click to access) from the FF and a majority of the Other Lenders . All documents are fixed, standard form documents and are not negotiable so no amendments will be accepted by the Future Fund (see drafting guidance).

There is no intention to provide any further extensions. The Future Fund will be seeking Redemption (Principal + 100% Redemption Premium) at the amended Maturity Date if the CLA remains outstanding at the end of an extension.

To document an extension to the maturity date the parties will need to amend the terms of the CLA. The CLA permits a variation to it provided that the company has first received Relevant Majority consent. This means that for the company to sign a deed of variation, it must have the signed written consent of the Relevant Majority, being the Future Fund and a majority of the Other Lenders (as a Lender Majority).

If you wish to request an extension to the CLA’s Maturity Date, we strongly recommend that you first confirm the agreement of the Other Lenders to the requested extension.

It is entirely within the discretion of the Future Fund to agree to an extension to the CLA. In assessing whether to exercise discretion to agree to an extension request, and providing that the requirements of an extension request referenced in the Q&A below are satisfied, the Future Fund may consider, amongst other things, its commercial objectives, the adequacy of the results of our KYB/KYC, anti-money laundering and fraud and financial crime checks, wider public policy aims and proper safeguarding of taxpayer resources. In particular, the Future Fund will take into account the Company’s ongoing compliance with the terms of the CLA and if there are any actual or potential breaches of the CLA (including but not limited to provision of the Quarterly Management Information in accordance with Schedule 4 or whether an Event of Default has occurred).

The Future Fund reserves the right to reject a request for an extension if there are reasonable grounds for suspecting an inability of the company to satisfy any of the criteria set out above.

Any extension request may be made if the Company and a majority of the Other Lenders (in respect of their Loans) agree the following minimum requirements:

• The loan period is extended by up to a maximum period of 2 years and the extension and any amended commercial terms apply for all parties to the CLA;
• The company’s director(s) provide a solvency statement in the Future Fund’s standard form;
• The extension is documented using FF standard templates (deed of variation and relevant majority consent) which are non-negotiable;
• The Discount Rate is increased by:
  • a minimum of 5% for an initial extension period of up to 12 months and
  • a minimum of 10% for an extension period beyond 12

If these minimum extension requirements are not agreed, then the Future Fund will not consider a request for an extension. Any extension to the CLA is agreed at the Future Fund’s discretion.

The Future Fund will conduct a number of checks on the company and the Other Lender(s) (including KYB/KYC and AML checks) and may require further information or documentation to be submitted as part of any extension request – see “What information will need to be provided?” below.

No, Future Fund will only agree to one extension variation. Once an extension is agreed and documented as a variation to the CLA, the Future Fund will not consider any further extensions to the Maturity Date. Therefore Companies need to request a sufficient period up to the 2 year limit to allow for a conversion event.

As part of an extension, the Other Lenders can negotiate the following terms under the CLA:

• Maturity Date: can be extended for up to a maximum period of 24 months
• Valuation Cap: If no Valuation Cap currently in place can introduce a Valuation Cap; if a Valuation Cap is currently in place can reduce its value or remain as per the current CLA
• Interest Rate: can be increased or remain as per the current CLA terms
• Discount Rate: the Discount Rate should show a minimum ratcheted increase of:
  • a minimum increase of 5% for conversions taking place within the first 12 months of the Extension (I.e. 36-48 months from CLA execution); and
  • a minimum increase of 10% for conversions taking place between 13 and 24 months after the extension (I.e. month 49-60 from CLA execution).

We would expect the Other Lenders to negotiate the commercial terms of any extension variation, with the Discount Rate increasing as outlined above as a minimum requirement for the Future Fund to consider the extension request. Any amended terms shall apply to the Future Fund and the Other Lenders.

o other CLA terms can be amended, and the template deed of variation provided should be used to reflect the revised CLA terms.

As part of the request for extension you may be asked to provide the following initial information as part of the checks by the Future Fund team, including:

• Up to date KYB/KYC documents, for both the Company (such as ultimate beneficial owners, directors and key related parties) and Other Lenders to complete regulatory checks for Anti Money Laundering purposes and the prevention and detection of fraud, money laundering and other financial
• Most recent Fully Diluted Share Cap Table
• Company latest management information and cash position
• Information on the Company’s policies, practices and procedures in relation to anti- bribery, anti-corruption and applicable sanctions laws.

The Future Fund may request additional information as part of the review process, in considering the extension and reserves the right to reject any and all extension requests at any stage, with or without cause.

If an extension request is approved by the Future Fund, the company will need to provide a solvency statement and the parties will need to formalise the variation by executing a deed of variation having received the signed and dated Relevant Majority consent from the Future Fund and a majority of the Other Lenders. All documents are fixed, standard form documents so no amendments will be accepted by the Future Fund.

A solvency statement signed by a director of the Company is required to be provided along with the deed of variation to document the amendment to the CLA. If the Company cannot provide a solvency statement, the Future Fund will not agree any extension.

Contact our customer support team as soon as possible by email to [email protected], stating the CLA ref and company name, so your query can be directed to the correct individual with details in terms of the information to be updated.

As set out above, the Future Fund may consider an extension request submitted as a ‘Maturity Intention’ portal notification within 20 business days of the initial Maturity Notification email. If the Company does not make such a request within 20 business days, the Future Fund will not consider an extension and, unless there is a Conversion Event, will elect to redeem its Loan on the Maturity Date.

If you are planning a Conversion Event (either an Exit or a Financing Event) which you anticipate will complete ahead of the Maturity Date you should notify the Future Fund using the Portal in accordance with the terms of the CLA. At the same time, an extension request can be submitted by the Company in response to the initial Maturity notification email to give comfort that an extension may be available should such a Conversion Event transaction be unavoidably delayed or not complete for any reason.

In exceptional circumstances only, the Future Fund (in its absolute discretion) may consider a short grace period to allow for completion of a Conversion Event transaction. This will only be considered where the Company has notified the Future Fund of a Conversion Event transaction in accordance with the CLA and completion of such underlying transaction is unavoidably delayed by a number of days (no more than 20 business days).

Where the company requests an extension, the company is not prohibited from undertaking a Qualified Financing Event, Non-Qualified Financing Event or Exit (whether anticipated at the time of a response or otherwise) prior to Maturity in accordance with the terms of the existing CLA. If the company has any concerns over being able to complete a Conversion Event ahead of the existing Maturity, you should consider submitting a request for an extension within the 20 business days of the initial Maturity Notification email for the Future Fund to consider in accordance with the extension criteria.

You should submit a separate Event Notification through the Future Fund portal to notify the Future Fund of a Qualified Financing Event, Non-Qualified Financing Event, Exit or Event of Default as per the terms of the existing CLA (see What You Will Need). If the extension is no longer required and/or the company no longer wants to proceed with an extension request, you should send an email to [email protected] confirming your irrevocable instruction that the extension is no longer required.

If you have a general query about a Maturity Date, please contact us on 03307260230 or email [email protected] stating the CLA reference and company name, so your query can be directed to the correct individual. If you want specific advice such as legal, tax or investment advice please speak to an appropriately qualified professional.

You can log a complaint (1) emailing our support team to [email protected], stating the CLA reference and company name or (2) phoning our support team on 03307260230. Contact details can be found on the support page of the Future Fund website.