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Offer by potential funder to fund costs of relevant action

Variable Capital Companies (Assignment of Proceeds of an Action) Regulations 2026

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—(1) A relevant insolvency practitioner of a VCC or sub‑fund may in accordance with this regulation solicit an offer from one or more creditors or members of the VCC or sub‑fund, or one or more Third‑Party Funders, to fund all or part of the costs of a relevant action, in return for the assignment of a share or other interest in the proceeds or potential proceeds of the relevant action to which the VCC or sub‑fund may become entitled.(2) When soliciting an offer from a creditor or member of the VCC or sub‑fund, or a Third‑Party Funder, the relevant insolvency practitioner must provide a copy of the written notice mentioned in paragraph (3) to the person.(3) The written notice must contain all material information necessary for the consideration by the creditor or member of the VCC or sub‑fund, or the Third‑Party Funder, of the invitation, including but not limited to —(a)the nature of the relevant action or contemplated relevant action;(b)the parties or potential parties involved;(c)the estimated potential proceeds of the relevant action or contemplated relevant action;(d)the estimated amount of funding sought; and(e)the date by which an offer of funding is to be received by the relevant insolvency practitioner.(4) An offer by a member or creditor of the VCC or sub‑fund or a Third‑Party Funder (called in this regulation the potential funder) to fund all or part of the costs of the relevant action or contemplated relevant action must be —(a)made in writing;(b)received by the relevant insolvency practitioner before the date mentioned in paragraph (3)(e) (or such later date as may be extended by the relevant insolvency practitioner);(c)accompanied by a statement that there is no actual or potential conflict of interest between the potential funder and —(i)the parties or potential parties in the relevant action or contemplated relevant action;(ii)the lawyer acting for the VCC or the umbrella VCC in respect of the sub‑fund in bringing the relevant action or contemplated relevant action; or(iii)the lawyer acting for the parties or potential parties in the relevant action or contemplated relevant action; and(d)accompanied by a statement —(i)that there is no actual or potential conflict of interest between the potential funder and the relevant insolvency practitioner; or(ii)describing the actual or potential conflict of interest between the potential funder and the relevant insolvency practitioner.(5) Where, at any time after a statement mentioned in paragraph (4)(c) or (d) has been given to the relevant insolvency practitioner, a potential funder or funder becomes aware of an actual or potential conflict of interest mentioned in that provision, that would render the statement incomplete or inaccurate, the potential funder or funder must immediately notify the relevant insolvency practitioner of the actual or potential conflict of interest concerned.(6) Before entering into a Funding Agreement with a potential funder pursuant to an offer made under this regulation, the relevant insolvency practitioner must obtain approval from the following:(a)in the case of a winding up by the Court — from the committee of inspection or failing such approval, from the Court;(b)in the case of a creditors’ voluntary winding up — from the committee of inspection or failing such approval, from the Court;(c)in the case of a members’ voluntary winding up — from the VCC or the members of the sub‑fund by special resolution.(7) Subject to paragraph (8), the relevant insolvency practitioner must not seek to obtain an approval mentioned in paragraph (6) if the relevant insolvency practitioner is aware of an actual or potential conflict of interest mentioned in paragraph (4)(c) or (d).(8) Where there is an actual or potential conflict of interest between the potential funder and the relevant insolvency practitioner, the relevant insolvency practitioner —(a)must make a full and frank disclosure of the interest —(i)in the case of a members’ voluntary winding up — to the members of the VCC or sub‑fund; or(ii)in the case of any other type of winding up — to the creditors of the VCC or sub‑fund; and(b)may seek an approval mentioned in paragraph (6) if the relevant insolvency practitioner has obtained the informed consent to do so of —(i)in the case of a members’ voluntary winding up — the VCC or the members of the sub‑fund by special resolution; or(ii)in the case of any other type of winding up — a three‑fourths majority in value of the creditors of the VCC or sub‑fund.(9) When seeking an approval mentioned in paragraph (6) from the committee of inspection, the VCC or the members of the sub‑fund by special resolution or the Court, the relevant insolvency practitioner must provide the material information relating to the offer, including —(a)the efforts taken by the relevant insolvency practitioner to solicit offers from creditors or members of the VCC or sub‑fund or Third‑Party Funders;(b)the identity of the potential funder; and(c)a summary of the material terms of the offer, including, where applicable —(i)the amount of funding to be provided;(ii)the purpose for which the funding is provided (e.g. lawyer’s fees);(iii)the order of priority or structure of the assignment of proceeds of the relevant action to the potential funder; and(iv)the share of the potential proceeds to be assigned to the potential funder.(10) A creditor or member of the VCC or sub‑fund who —(a)has made an offer to fund all or part of the costs of the relevant action or contemplated relevant action for which approval is being sought; or(b)is a defendant or potential defendant in the relevant action or contemplated relevant action,must not attend or vote in a meeting of the committee of inspection or the VCC or the members of the sub‑fund to consider a special resolution, to approve the entering into a Funding Agreement to fund all or part of the costs of that relevant action.

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