The project reaches its agreed funding target. That is an important point in the commercial relationship, and it should already have a defined treatment in the documents.
Does the project allocation stop? Is future output redirected to the investor or a reserve? Does another stage need fresh approval?
Our overview allows project allocations to be capped and the subsequent waterfall to be revised by written agreement. The details should be considered when the original structure is designed.
Define what counts towards the cap
The parties should agree whether the target measures amounts allocated, amounts paid or funds received by the project. Conversion and other costs can affect the difference between those figures.
The reporting should use the same basis so that everyone can identify when the target is reached. A cap is only useful if its calculation is clear.
The project should also have a defined scope. Reaching a funding target does not by itself confirm that every delivery milestone has been completed.
Agree the treatment of later distributions
The original documents may specify the next allocation, or require a review and written amendment. Either way, payment authority needs to remain clear.
Money should not be redirected informally because one party believes the initial purpose has been fulfilled. Investor, project, reserve and approved-fee interests may all be affected.
Any continued programme participation remains subject to its own term, conditions and acceptance.
Treat a new project stage as a new decision
Additional development, another acquisition or an increased programme allocation may be considered after the relevant funds are available. The new use needs a defined purpose, budget and the appropriate approvals.
This preserves a clear record of what the original arrangement achieved and what the parties are now agreeing to undertake.
If you are structuring a project with an identified investor, include the funding cap and intended post-cap treatment in the initial brief. We can then consider the full commercial life of the proposed arrangement, from the first allocation to the next decision.
Funding caps, post-cap distributions and new allocations require written terms. Future programme output and continued availability are not guaranteed.