What happens if Funderbeam/Startup goes out of business?
As much as we’re working to make this as unlikely as possible, you will need to be aware of this as a possibility, as investing does contain risks.
This means that the value of investments we hold for you decreases (i.e. nominee structure) or the value of your claim against an SPV decreases (i.e. loan note structure). This is when the investment risk realises. Unfortunately, in this case, the value of your investment will likely drop to zero or to a negligible value, or to your share of the assets left to be distributed to unsecured creditors of the company, if any, following the conclusion of the relevant insolvency process.
In this scenario, we need to distinguish the different investment structures we use in our business. Firstly, when we hold your investment in trust as a nominee or through a nominee securities account with a central securities depository (i.e. nominee structure), then these investments are segregated from our assets by law. Our creditors cannot attach any claims against these assets. Secondly, if you have granted a loan to an SPV with the purpose of making an investment in an investee company (i.e. loan note structure), then the securities issued by an investee company formally belong to the SPV and any rights attached to these securities are legally tied to the loan agreement. The protections for you as an investor are manifold: (i) an SPV has no other business than the investment in a single investee company and is thus subject to no claims from third persons; (ii) the shares of an SPV are not held by the company providing the service to protect against the insolvency of the operational company; (iii) the repayment obligation under the loan agreement and the investment or any proceeds in relation to the investment are tied together. Therefore, an insolvency of a Funderbeam entity does not affect your loan relationship with the SPV and the registry of loan note holders can be handed over to another service provider, a Lead Investor, an SPV itself or to another person chosen by investors. If the operations of the whole Funderbeam group are terminated then it is a matter of the liquidator or insolvency administrator to handle the continuance or transfer of the SPV together with the assets and contractual relationships.
Even when the shares of an SPV are handed over to a third person, i.e. not a Funderbeam company, Lead Investor or another person related to a specific syndicate, then the investor’s claim against the SPV and the rights of the SPV as an investor in an investee company remain intact under the loan note agreement.
The funds you transfer to, and hold on, our account for the purposes of making investments (i.e. the Wallet function) are held on client money / trust accounts with recognised and authorised credit institutions. This money is held and segregated as your money and it does not belong to us.
️Warning: Investing in early-stage and growth companies puts your capital at risk. Please read our Risk Disclosure Statement