Prepaid Forward Purchase Agreement for the United Kingdom

Prepaid Forward Purchase Agreement Template for England and Wales

A Prepaid Forward Purchase Agreement is a legally binding contract governed by the laws of England and Wales, where one party (the Forward Purchaser) makes an upfront payment to another party (the Forward Seller) for the future delivery of specified assets at a predetermined date. The agreement includes detailed provisions for settlement, pricing mechanisms, representations and warranties, and events of default, all structured within the framework of English law and financial regulations.

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What is a Prepaid Forward Purchase Agreement?

A Prepaid Forward Purchase Agreement is commonly used in financial and commercial transactions where parties wish to secure future delivery of assets with upfront payment. Under English and Welsh law, this document establishes the terms for such arrangements, including payment obligations, delivery specifications, and risk allocation. The agreement is particularly valuable for businesses seeking to manage price volatility and secure supply chains, while complying with UK financial regulations and reporting requirements. This contract type typically includes detailed provisions for calculation methodologies, settlement procedures, and default scenarios.

What sections should be included in a Prepaid Forward Purchase Agreement?

1. Parties: Identification and details of the contracting parties

2. Background: Context and purpose of the agreement

3. Definitions: Key terms used throughout the agreement

4. Purchase and Sale: Core terms of the forward purchase arrangement

5. Payment Terms: Prepayment amount, timing, and method

6. Settlement: Delivery and settlement mechanics

7. Representations and Warranties: Standard and transaction-specific representations

8. Events of Default: Circumstances constituting default and consequences

9. Governing Law and Jurisdiction: Choice of law and dispute resolution provisions

What sections are optional to include in a Prepaid Forward Purchase Agreement?

1. Collateral Arrangements: Security provisions when additional security is required

2. Early Termination: Voluntary termination provisions when early termination options are negotiated

3. Market Disruption: Provisions for market disruption events, particularly relevant for transactions involving listed securities or commodities

What schedules should be included in a Prepaid Forward Purchase Agreement?

1. Form of Settlement Notice: Standard form for settlement notifications

2. Calculation Methods: Detailed pricing and calculation methodology

3. Asset Description: Detailed description of the underlying assets

4. Required Approvals: List of required regulatory or corporate approvals

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

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Financial Services and Markets Act 2000: Primary legislation governing financial services regulation in the UK, including the framework for regulated activities and financial promotions

Companies Act 2006: Core company law legislation relevant for corporate entities entering into the agreement and their capacity to contract

Contract Rights of Third Parties Act 1999: Legislation governing how third parties may enforce terms of a contract, relevant for assignment and transfer provisions

Sale of Goods Act 1979: May be relevant if the underlying asset of the forward purchase agreement consists of goods

FCA Handbook: Detailed regulatory rules and guidance from the Financial Conduct Authority applicable to regulated activities

Regulated Activities Order 2001: Specifies which activities require FCA authorization, including certain derivatives and forward contracts

UK MiFID II: Post-Brexit UK version of EU Markets in Financial Instruments Directive, governing investment services and activities

UK Market Abuse Regulation: Regulations preventing market abuse and insider trading in financial instruments

UK EMIR: UK version of European Market Infrastructure Regulation, governing derivatives trading and reporting

Financial Collateral Arrangements Regulations 2003: Regulations governing the provision of financial collateral in financial contracts

Insolvency Act 1986: Legislation governing insolvency proceedings and relevant for default provisions

Banking Act 2009: Relevant when dealing with financial institutions, particularly regarding resolution and insolvency

Money Laundering Regulations 2017: Anti-money laundering requirements including customer due diligence obligations

Proceeds of Crime Act 2002: Criminal law framework for money laundering offenses and reporting requirements

Income Tax Act 2007: Tax legislation relevant for income tax treatment of payments under the forward agreement

Corporation Tax Act 2009: Tax legislation governing corporate tax treatment of forward contracts and related payments

Taxation of Chargeable Gains Act 1992: Tax legislation relevant for capital gains treatment of forward contracts

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What is a Prepaid Forward Purchase Agreement?

What sections should be included in a Prepaid Forward Purchase Agreement?

What sections are optional to include in a Prepaid Forward Purchase Agreement?

What schedules should be included in a Prepaid Forward Purchase Agreement?

Authors

Alex Denne

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