Basics of legal funding

How much do funders charge?

If a case is successful, the funder will take their invested capital back plus a success fee. The success fee is often, not always, based on a multiple of the funder’s investment or a fixed percentage of damages. This can vary from one funder to the next and is often based on the overall risk assessment and variables of the case presented. These returns are paid from the damages that the losing opponent is ordered to pay.

What makes a case fundable?

Funders will look for cases with good merits which requires the case to be strong in terms of liability, causation and a financial settlement arising. The funders will look at how long the case has to run to the final hearing and they will also look to see how the case is currently advancing. The funders would require a written opinion on the merits of your case to assess this fully.

What does a funding contract look like?

There are certain standard provisions that pertain to any funding agreement, including the definition of proceeds, “waterfall” provisions, early repayment rights, ethical considerations (including the control of settlement), the distribution of funds, and the ability of the funder to cease making further payments (if funding is not “lump-sum”). Special attention must also be paid to the tax treatment of the financing, especially if an off-shore entity is being used as a vehicle for the funding.