Updates on Legal Funds Status

Updates on Legal Funds Status | 22nd April, 2020

The UK Government and financial regulators have announced a series of measures to support businesses during the ongoing Covid-19 crisis.

The Financial Conduct Authority (FCA) has granted an extension for firms to publish their annual and half-yearly reports. Firms will now have an extra two months and an extra month respectively to publish these reports. This extension is aimed at providing relief to companies grappling with the challenges posed by the pandemic.

In a significant move, the UK Government and the British Business Bank launched the Future Fund, a new £500 million loan scheme for high-growth firms, in May 2020. The scheme will remain open until the end of September. To be eligible for the Future Fund, a business must be an unlisted UK registered company that has previously raised at least £250,000 in equity investment from third-party investors in the last five years. The government is committing an initial £250 million in funding towards the Future Fund, with private investors at least matching the Government’s commitment.

The funds will be available to existing Innovate UK customers on an opt-in basis, with an extra £550 million available to increase support for existing customers and £175,000 offered to around 1,200 firms not currently in receipt of Innovate UK funding. The targeted support will be available through Innovate UK's grants and loan scheme for small and medium-sized businesses focusing on research and development.

The loans offered under the Future Fund will automatically convert into equity on the company's next qualifying funding round, or at the end of the loan if they are not repaid.

The UK Government announced a £1.25 billion support package for UK businesses driving innovation and development on 20th April 2020. This package is part of the government's efforts to help businesses navigate the challenges posed by the pandemic.

In the realm of financial regulation, the FCA has confirmed that it will not take enforcement action against a firm that is struggling to meet regulatory deadlines as a result of Covid-19. The FCA has also stated that firms may hold their general meetings in a virtual format and that the regulator is willing to accept electronic signatures on applications to authorise funds or approve changes to funds.

ESMA, the European Securities and Markets Authority, has urged European regulators to adopt a risk-based approach and not prioritise supervisory actions against fund managers if they are struggling to meet regulatory deadlines as a result of Covid-19. ESMA has also launched a consultation paper on the standard forms, templates, and procedures that Member State national competent authorities should use to publish information on their websites to facilitate cross-border distribution of funds.

ESMA has also published final guidance on performance fees in investment funds, applicable to Undertakings for Collective Investments in Transferable Securities (UCITS) and some types of open-ended alternative investment funds (AIFs) marketed to retail investors. Furthermore, ESMA has issued a public consultation on draft guidelines to address leverage risks in the alternative investment fund sector.

In light of the pandemic, at least 10 daily traded property funds, managing more than £12.9bn in assets, have been suspended due to uncertainty over the value of their underlying properties.

The British Venture Capital Association (BVCA) recently published a survey on emerging managers, finding that almost all respondents said that emerging managers have advantages over established ones. However, the lack of track record remains the number one challenge for investors when assessing emerging managers.

In a bid to facilitate business continuity and regulatory compliance amid social distancing and restrictions, the UK Financial Conduct Authority supported German investment firms in using electronic signatures during the Covid-19 pandemic. This move ensures efficient remote operations without compromising legal and security standards.

These measures underscore the UK Government and financial regulators' commitment to supporting businesses during these challenging times.