An investment in a business through a preliminary contract (“ASA”) is a form of equity and not an investment of capital, since the invested funds cannot be repaid to the investor in the form of cash. The ASA is an agreement whereby, although the reference funds are paid out in advance, the shares of the investment will be calculated and issued at a later date. An investment through an ASA can be made compliant with SEIS/EIS, because (i) the investor`s funds are threatened from the outset and (ii) the investor cannot demand the return on his investment, since the money paid must be converted into company shares. HMRC had previously limited the date of longstop to a maximum of 12 months after the ASA agreement – whether it were to be used for SEIS or EIS investment purposes. However, new updates have been released from February 2020. Tags: Pre-subscription contract, SEIS/EIS-Compliance The more complex the agreement or the longer the period between pre-purchase and share issuance, the greater the risk of non-compliance with EIS discharge rules. In addition, the guidelines specify that HMRC ASA will not be suitable for SEIS and/or EIS, unless the agreement is reached: to set up the scene, we wanted to quickly address certain issues when deciding between a convertible debt tower (with a convertible note) Convertible Equity Structured Round (with ASA, Simple Agreement for Future Equity Round (SAFE) and a share price round (with a note, etc.). The new guidelines confirm HMRC`s long-standing positions on a number of technical issues. For example, the ASA should not act as an investment tool with other benefits, such as investor protection.B. The new guidelines also state that HMRC does not consider ASAS to be suitable for SEIS and/or EIS unless the agreement: without these features, HMRC is likely to consider that pre-subscription is indeed a loan (and that loan conversions are not eligible for SEIS or EIS). As the name suggests, this is a special agreement used by investors and companies seeking financing.
The agreement allows an investor to pay in advance for the company`s shares to be awarded at a later date. Often, this date coincides with the date of the next financing cycle (the next time the company wants investments), but it could also be at the point of sale of the company or at an agreed long-term date (more information on this below). A SEIS/EIS compliant model for pre-presentation agreements can be downloaded from our store. If you collect money in the usual way, you can also buy a normal subscription contract. Please note that this article has been revised as a result of the new hmrc pre-subscription contract guidelines for December 30, 2019. Reference is the EIS guidelines here and the SEIS guidelines above, advance underwriting, where an investor transfers funds to a company in order to acquire a right to purchase shares at a later date (usually the next qualifying financing cycle). By moving the evaluation process to multiple fundraising rounds, the company can raise money more quickly. Investors often benefit from a higher return on their investment, as they generally receive a 10-30% discount on the price per share in the next round of financing to compensate for their advance transfer. One solution to the problem was for investors to enter into subscription agreements with an Advance Subscription Agreements to pay subscription funds to the company, with the shares being issued at a later date and an valuation to be determined at the time of the actual issuance of the shares. The investor may have no connection to the company in which he invests two years before the date of his investment or three years after the date of his investment.