Glossary of terms

This list sets out defined terms that are used in the portal and the FAQ documents.

A

AIM

The Alternative Investment Market, a sub-market of the London Stock Exchange.

AML

Anti-money laundering.

Application

The process of applying to the Future Fund for investment by the Future Fund.

ASA

Advanced subscription agreement.

Association of High Net Worth or Sophisticated Investors

An association of high net worth or sophisticated investors as defined in article 51 of the FPO. This is an association wholly or predominantly made up of certified high net worth individuals, high net worth companies or unincorporated associations or trusts, or certified or self-certified sophisticated investors.

This includes individuals who are members of an association with a particular membership and not simply the operator or secretariat of the association. This extends to members who are not themselves certified high net worth individuals, high net worth companies or unincorporated associations or trusts, or certified or self-certified sophisticated investors.

B

BBLS

Bounce Back Loan Scheme.

British Business Bank

British Business Bank is the UK Government’s economic development bank.

British Business Bank plc (company number 08616013) and its subsidiary entities are not banking institutions and do not operate as such. You can find a complete legal structure chart for British Business Bank plc and its subsidiaries at www.british-business-bank.co.uk.

C

CBILS

Coronavirus Business Interruption Loan Scheme.

CLBILS

Coronavirus Large Business Interruption Loan Scheme.

Certified High Net Worth Individual

A certified high net worth individual as defined in article 48 of the FPO. A certified high net worth investor is an individual who has signed a statement in the form prescribed in Part I (Statement for certified high net worth individuals) of Schedule 5 to the FPO.

The statement must include a confirmation that:

• he/she had an annual income to the value of at least £100,000 during the financial year immediately preceding the date of the signed statement; or
• he/she has held net assets to the value of at least £250,000 throughout the financial year immediately preceding the date of the signed statement.

Net assets do not include: (a) such individual’s property that is their primary residence or any loans secured over that property; (b) any rights such individual has under a qualifying contract of insurance within the meaning of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001; or (c) any benefits (in the form of pensions or otherwise) which are payable on the termination of such individual’s service or on their death or retirement and to which the individual (or their dependants) are, or may be, entitled.

The statement must have been signed within the last 12 months.

Certified Sophisticated Investor

A certified sophisticated investor as defined in article 50 of the FPO.

In order to be a certified sophisticated investor, the person must have a current certificate signed by an authorised person (an entity authorised by the FCA or PRA) stating that they have enough knowledge to be able to understand the risks associated with the description of the investment. This certificate must be signed and dated not more than three years ago.

The “description of investment” relates to a category of investments with similar characteristics. Examples are given below:

• The shares in a private company are not the same “description of investment” as shares in a public limited company as there will usually be certain significant distinctions. For instance, there will often be restrictions on the transfer of shares in a private company.
• Shares traded on a market or exchange will be a different “description of investment” to unlisted shares.
• Shares which have similar characteristics will be of the same “description of investment” irrespective of whether they are shares of companies in the same market or geographical sector.

The recipient must also have signed a statement in the terms in article 50(1)(b) of the FPO. The statement must have been signed within the last 12 months.

Connected (and “connected person”)

As described within the definition of “Private investor” in this glossary of terms.

Convertible Loan Agreement or CLA

The convertible loan agreement to be entered into by the Lead Investor, any Other Investors (if applicable), the Investee Company and UK FF Nominees Limited following a successful Application.

D

Discount rate

The discount that the Investors will receive compared to the share price at which other shares in the Investee Company are being issued (or have been issued in a previous funding round) in respect of a conversion event.

E

EIS

The Enterprise Investment Scheme.

Eligible Investor

Any Investor who is within the scope of the following categories set out below and as defined within this glossary of terms:

• An Investment Professional
• A High Net Worth Company, Unincorporated Associated or High Value Trust
• A Certified Sophisticated Investor or a Self-Certified Sophisticated Investor
• A Certified High Net Worth Individual
• An Association of High Net Worth or Sophisticated Investors
• Capable of being classified as a Professional Client
• An Equivalent Professional, High Net Worth, Institutional or Sophisticated Investor

Equivalent Professional, High Net Worth, Institutional or Sophisticated Investor

An Investor who is equivalent to (i) an Investor capable of being classified as a Professional Client; (ii) a High Net Worth Individual; (iii) Investment Professional; (iv) High Net Worth Company, Unincorporated Associated or High Value Trust; (v) Certified Sophisticated Investor or Self-Certified Sophisticated Investor; or (vi) Association of High Net Worth or Sophisticated Investors in accordance with applicable law and regulation in such Investor’s home jurisdiction.

F

FCA

The Financial Conduct Authority.

FCA FRN Number

A UK regulated entity’s Financial Services Register reference number which is provided to the firm on authorisation.

FCA Rules

The FCA’s handbook of rules and guidance.

FPO

The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005.

Future Fund

The Future Fund is a scheme to support innovative UK companies with good potential that typically rely on equity investment and are currently affected by COVID-19. Until now, these companies have been unable to access other government business support programmes because they are either pre-revenue or pre-profit.

The Future Fund will help these companies through the current period of economic disruption and the recovery, so they are able to continue their growth trajectory and reach their full economic potential. The scheme will issue convertible loans to those UK companies.

H

Headroom amount

The maximum amount of additional loans from further investors on substantially the same terms as the Loans that an Investee Company may issue in a 90-day period following completion of a CLA transaction relating to that Investee Company.

The headroom amount is agreed by the Investee Company and Investors (other than the Future Fund) as part of the Application and is included in the execution version of the CLA. If no headroom amount is agreed, the value will be zero. Such additional investment from further investors must be arranged by the Investee Company outside of the portal and is not eligible for matched funding.

High Net Worth Company, Unincorporated Association or High Value Trust

A high net worth company, unincorporated association or trust as defined under article 49 of the FPO. This is an entity or organisation that satisfies the conditions in article 49(2)(a) to (d) of the FPO. This comprises:

• any body corporate which has, or which is a member of the same group as an undertaking which has, a called-up share capital or net assets—
  • if the body corporate has more than 20 members or is a subsidiary undertaking of an undertaking which has more than 20 members, not less than £500,000;
  • otherwise, not less than £5 million;
• any unincorporated association or partnership which has net assets of not less than £5 million;
• the trustee of a high value trust;
• any person (“A”) whilst acting in the capacity of director, officer or employee of a person (“B”) falling within any of sub-paragraphs (a) to (c) above, where person A’s responsibilities, when acting in that capacity, involve him in person B’s investment activity.

For the purposes of this definition, a “high value trust” is a trust where the aggregate value of the cash and investments which form part of the trust’s assets (before deducting the amount of its liabilities):

• is £10 million or more; or
• has been £10 million or more at any time during the last year.

HMRC

HM Revenue & Customs

I

Information

All information and documents in connection with the Future Fund that appear on this portal.

Investee Company

The company to which the Loans will be made pursuant to the CLA.

Investment or fund manager/adviser

Refers to a firm authorised by the FCA or PRA to manage or advise investments or funds; or an equivalent overseas firm for whom the FCA is its host regulator.

Investment Professional

An investment professional as defined in article 19 of the FPO. Investment professionals comprises:

• PRA or FCA authorised entities;
• exempt persons (entities who are exempt from the requirement to be authorised by the FCA or PRA – for example, the Bank of England (BoE), clearing houses and appointed representatives) where the communication relates to a controlled activity that is a UK regulated activity and in relation to which the person is exempt;
• a government, local authority (in the UK or elsewhere) or an international organisation (that is, any body the members of which are EEA states (including the UK) or bodies whose members comprise EEA states (including the UK));
• any person whose ordinary business activities involve carrying on the controlled activity to which the communication relates (this includes investment trust companies; companies which provide venture capital; large companies which have a corporate treasury function; other persons who carry on an activity such as dealing in, arranging or advising on investments but who do not require authorisation because of an exclusion in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 and professional firms who are exempt under the Financial Services and Markets Act 2000); and

It also includes persons acting in their capacity as directors, officers or employees of any of the above.

Investor

A person entering into the CLA in order to make a Loan to the Investee Company. Each Investor entering into the Loan (other than the Future Fund) must be an Eligible Investor.

IPO

Initial public offer.

K

KYC

KYC is the Know Your Customer verification process. This process seeks to verify the identity and background of Investors to the Future Fund.

L

Lead Investor

The Eligible Investor who leads the Application. The Future Fund requires a Lead Investor to complete the Application and submit information about itself, the Investee Company and the Other Investors.

LEI

Legal entity identifier.

LLP

Limited liability partnership.

Loans

The loans made to an Investee Company pursuant to a CLA.

LS E&W

The Law Society of England and Wales.

LSNI

The Law Society of Northern Ireland.

LSS

The Law Society of Scotland.

N

Non-regulated entity

An entity that is not authorised by the FCA or PRA or an overseas firm for whom the FCA is its host regulator.

Non-regulated individual

A person who has not been:

• formally approved to perform a role by the FCA or PRA
• certified as fit and proper to perform a role in a UK-regulated firm, or
• formally approved by an equivalent overseas financial services regulator

O

Other Investor

An Investor other than the Future Fund and the Lead Investor. Each Other Investor must be an Eligible Investor.

P

PEP

A PEP is a politically exposed person. This is defined as an individual who is or has been entrusted with a prominent public function, and is normally a person in an influential and prominent political position operating within a domestic or foreign capacity.

PRA

The Prudential Regulation Authority.

Private investor

A private investor is a person, company or fund who:

• is not connected with the Investee Company, or with a connected person of the Investee Company immediately prior to completion of the CLA
• invests capital into such company, with the objective of helping it grow and getting a return on their investment.

For these purposes, “connected” and “connected person” have the meanings attributed to such terms at the date of the CLA by sections 1122 and 1123 of the Corporation Tax Act 2010.

Professional client

A professional client is defined in chapter 3 of the FCA’s Conduct of Business Sourcebook.

Prospectus Regulation

Regulation (EU) No 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC.

R

Redemption Premium

A premium equal to 100% of any particular Loan.

Regulated entity

Either:

• a firm authorised by the FCA or PRA, or
• an overseas firm for whom the FCA is its host regulator

Regulated individual

A person who is:

• formally approved to perform a role by the FCA or PRA
• certified as fit and proper to perform a role in a UK-regulated firm
• formally approved by an equivalent overseas financial services regulator

S

SEIS

Seed Enterprise Investment Scheme.

Self-Certified Sophisticated Investor

A self-certified sophisticated investor as defined in article 50A of the FPO. A self-certified sophisticated investor is an individual who has signed a statement in the form prescribed in Part II (Statement for certified sophisticated investor) of Schedule 5 to the FPO. This statement includes a confirmation that one or more of the following statements apply to them:

1. He/she is a member of a network or syndicate of business angels and has been so for at least six months prior to the date on which the certificate was signed.
2. He/she has made more than one investment in an unlisted company in the two years prior to the date of signing the statement.
3. He/she is working, or has worked in the two years prior to the date of signing the statement, in a professional capacity in the private equity sector, or in the provision of finance for small and medium enterprises.
4. He/she is currently, or has been in the two years prior to the date of signing the statement, a director of a company with an annual turnover of at least £1 million.

The required statement must have been signed within the last 12 months.

SRA

The Solicitors Regulation Authority.

T

Tax

Any and all present or future taxes (including VAT or other similar taxes), levies, imposts, duties or other charges, fees, deductions or withholdings of a similar nature arising or payable at any time in any jurisdiction (including any penalty or interest payable in connection with the failure to pay, or delay in paying, any of these).

Third-party investor

An individual or entity that invests in the share capital of a company, other than any founder, employee, worker or consultant of the Investee Company and any of their connected persons.

“Connected person” has the meaning attributed to it at the date of this certificate by sections 1122 and 1123 of the Corporation Tax Act 2010.

U

UK FF Nominees Limited

UK FF Nominees Limited (company number 12591650) is the entity that enters into Convertible Loan Agreements on behalf of the Future Fund.

It is legal titleholder to the Future Fund’s Loans and any shares resulting from their conversion. It holds beneficial interest in the Loans (and any shares resulting from their conversion) on bare trust for the benefit of the Secretary of State for Business, Energy and Industrial Strategy.

V

Valuation cap

The valuation cap relates to the maximum price per share at which Loans can convert. This means that if, on a conversion event, the price at which shares would otherwise be issued to the Investors (having accounted for the Discount Rate, where applicable) would cause the valuation cap to be exceeded, the price per share will be adjusted downwards (and hence the Investors will receive more shares) in order to keep within the valuation cap.

Such a valuation cap is a matter to be agreed between the Investors (other than the Future Fund) and the Investee Company prior to the Application.