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Advising on Foresight’s Inheritance Tax Fund has given associate Peter Mayhew an unparalleled insight into one of Shakespeare Martineau’s key clients.

“It touched on every facet of the client’s internal operations, from its CEO to its executive committee, and the sales, marketing, product development, compliance, investment and finance/administration teams, all of whom were stakeholders in the process,” he says. “On a typical fund transaction for a client of this size, only a handful of these stakeholders might be expected to be involved, but such is the importance of this fund to the client and the breadth of the matters involved in the transaction that this wasn’t the case here.”

Shakespeares has acted for Foresight since 1996, which at the time comprised its two individual founding members. The firm’s relationship with the client has remained strong from the launch of its first retail product and through its growth and expansion. It supports Foresight at various levels both internally in areas such as governance, compliance, data protection, property and management arrangements, as well as in respect of its various funds from structuring, launch, fundraising, investments, mergers and exits, including on and offshore.

“Although we pride ourselves on the project management approach that we take to our investment funds work, and while we have a longstanding and close working relationship with the client, this particular transaction really felt like we were involved at the very heart of the client and pumping the blood to all its key organs,” Mayhew says.

Peter Mayhew, Shakespeare Martineau
Peter Mayhew, Shakespeare Martineau

“My biggest takeaway was the benefit of having a detailed and comprehensive structure and process notes against which to sanity check the implementation documentation and regular touchpoints with the various key stakeholders within the client and having them all together at the same time at key points. This significantly helped to overcome the various hurdles along the way in terms of educating and informing the client and managing the delicate balance of each stakeholder’s competing interests.”

Foresight is an award-winning infrastructure and private equity investment manager with around £7.2bn of assets under management. Its markets include global infrastructure, in particular renewable energy infrastructure, and UK private equity, supporting regional SMEs with both markets increasing focused on ESG and sustainability led strategies.

The Foresight Inheritance Tax Fund is one of Foresight’s primary products which Shakespeares helped structure and launch in 2012. The structure was finely balanced to sit within Foresight’s regulatory permissions alongside corporate, contract, tax issues and investor facing implications. The fund constitutes an alternative investment fund, but does not have a corporate wrapper, which requires careful explanation and operation.

This was the first inheritance tax product that Shakespeares helped launch and was a natural extension of the firm’s expertise with other tax related products, notably the venture capital schemes, and bespoke fund structuring. This initial fund led to the firm acting for several other clients in launching similar funds and related services, including Bestport Private Equity, Altitude Partners and Chrystal Capital.

The fund now includes an insured solution variant (which Shakespeares also helped to structure and launch) providing protection if a qualifying investor dies before expiry of the two-year holding period required to attract business relief in respect of the investment. The value of the fund is now around £760m.

To navigate the various launch objectives, the original structure of the fund resulted in having a bespoke investment share price and fees per investor. To provide better transparency and consistency on value and fees, as well as reduce the administration burden, Foresight asked Shakespeares to re-work the structure of the fund.

The structure of the Foresight Inheritance Tax Fund is finely balanced to achieve several competing objectives. The key issues relate to investors’ holdings being eligible for business relief, Foresight’s regulatory permissions to manage, promote and distribute the fund, inability of intermediaries to advise on unregulated collective investment schemes and integrating the insurance element. These elements, together with more than 4,000 investors with individual contracts, made restructuring the fund complex.

The fund also touches numerous internal Foresight teams from sales, investor relations, investment management, finance and administration. Each had differing objectives and priorities. There were also several third parties that would need to provide input and/or approval, including the receiving agent, depositary and multiple insurers.

It was, therefore, clear that one person would need to have overall visibility of all the moving elements and manage the project. This is one of Shakespeares’ key strengths and, due to the firm’s intimate knowledge of Foresight and the fund, it took on this responsibility, a role normally carried out by an internal representative of the fund. This is in testament of the trust the client places in us. Kavita Patel, with support from Mayhew, pro-actively managed the project from start to finish over a 12-month period.

Mayhew is a legal director and senior associate and works alongside Patel on many investment fund matters. He joined the firm in September 2007 as a trainee solicitor and qualified in September 2009 as a solicitor in the investment funds team. “I am fortunate to have a diverse range of investment funds work and the benefit of the venture capital/private equity work that flows from it,” he says.

“I have primarily worked with Kavita Patel, and for a short while prior with her predecessor, Roger Blears (now of RW Blears) and assisted both Catherine Moss and Julian Turnbull with investment fund related matters in recent years since they joined the firm,” he adds.

“This deal has given me additional confidence insofar as not being daunted by the sheer magnitude of any given transaction, in particular when it is broken down into manageable workflows and timetables. It will certainly re-enforce my thinking as to the value of a project managed service offering and ensuring this level of service is offered to all of our clients as the circumstances require.”

The thing that particularly stood out about this deal, according to Mayhew, was the number of different work streams and the sheer level of project management involved “and yet how controlled and seamless it all felt, notwithstanding the fact that it was all undertaken during covid-19 lockdown”.

He says achieving a structure at both fund and investment level, which met with regulatory compliance, was probably the bigger hurdle but by working closely with the client’s external FCA compliance advisers, Bovill, the firm managed to work through it.

“Achieving a uniform single share price for the fund given its underlying structure was a feat of corporate engineering in its own right and was the product of much blood and sweat, with very little tears, from the sub-team involved on that work stream. The process was incredibly collaborative, both internally and also with the client, but equally constructive in terms of robust stress testing of the calculation workings and challenging various underlying assumptions,” he says.

The key aspect was to change the structure of ongoing fund fees, which was different per investor and charged on a bespoke basis by reference to the value of each individual investor’s investment account. This would need to move to a consistent fee level against the underlying net asset value of the fund and an alternative charging mechanism for any bespoke fees.

Shakespeares developed and considered several structures over a six-month period. At each turn the firm encountered an unresolvable issue with one of the stakeholders due to the finely balanced structure, be it from regulatory restrictions, company/contractual law issue, investor disadvantage, continued/increased administration complexity and commercial aspirations.

This led to further ‘outside the box’ thinking and the firm came up with a structure at both fund and investment level which, with a few compromises, materially addressed everyone’s key objectives. Shakespeares’ structure would remove a substantial amount of the complex and time-consuming administration for the investor base, but also result in all investors’ holdings being represented by a consistent share price.

This allowed the firm to move to implementing the restructuring, which involved a number of work streams completed in tandem. First, the individual contracts with each investor required amendment (there being multiple variants, investor tailored amendment notices and pandemic considerations), alongside a complex restructuring of the underlying investment holdings to calibrate investor holdings to a single share price. In addition, new information memoranda for the insured and uninsured variants of the fund were issued for new investors. These actions required careful timing. Across all these work streams, various third parties had to be managed and approvals secured without prejudicing the overall timetable.

Shakespeares completed the project successfully in January 2021. It achieved Foresight’s objective of simplifying the fund’s fee structure, creating a single share price for investor/market presentation, ensuring alignment of investors’ interests across its business relief products and providing fresh sales documentation with which to continue fundraising.

Shakespeares was commended on its ability to navigate complex tax, regulatory and corporate aspects, as well as its project management skills to deliver implementation on time and to the legal fees budget. The structuring and implementation delivery the firm provided shows its innovation and skillset in the investment funds market.

The firm continues to act in relation to the Foresight Inheritance Tax Fund and more widely with Foresight on various projects (including advising on new products, existing fund further fundraisings and deployment through investments). Its work in relation to the Foresight Inheritance Tax Fund is an example of its focus on building relationships with clients through understanding their business and objectives.

Meanwhile, Mayhew says he’s found himself doing more VC investment and general corporate work than big ticket funds work since the deal. “That being said, I have just recently acted for the Mobeus VCTs on the sale by Mobeus Equity Partners of their VCT management business to Gresham House,” he adds.

About Peter Mayhew

2007-present: Legal director, Shakespeare Martineau

Who’s Who: the Shakespeare Martineau  team

Lead partner: Kavita Patel

With: Peter Mayhew, Ollie Gutman

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