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. In addition, the guide states that hmrc ASA, which is suitable for SEIS and/or EIS, is qualified only if the agreement does not exist: the company should carefully consider all other events that would trigger the conversion of advanced funds into shares, in addition to qualifying cycles or long shutdown dates, such as the sale of the business. B.dem. The startup must remember that by entering into an expanded subscription agreement, a start-up gives the investor the right to subscribe shares, which is why, as with any other share issue, directors have the power to award the shares and apply to any pre-emption rights? Pre-emption rights are where existing shareholders of a company have a pre-emption right when issuing shares, i.e. the shares must be offered to existing shareholders before being offered to new investors. It is therefore important for a start-up to be aware of the application of pre-emption rights and to integrate it within any time for the conclusion of the extended subscription contract. Under an expanded underwriting contract, the valuation issue is delayed until the next funding round. However, the start-up should ensure that an valuation cap is included to ensure that existing shareholders have some certainty about the level of dilution of their stake during the transformation. The investor must be aware of the terms of a shareholders` pact and a status to which they are subject as soon as the investment is converted and the shares of the creation are issued.
Parties should consider whether, in addition to a qualifying financing cycle or a long-term deadline for automatic conversion of shares under the expanded underwriting agreement, for example in the event of the sale of the start-up. B, there are other circumstances. Seed and start-up companies often need early resources during their life cycle to launch a concept, expand their business offering or go into business. They sometimes obtain financing through convertible bonds (LNCs) that can be converted into shares in the future. Another financing opportunity for previous activities is the adoption of Extended Underwriting Agreements (ASAs), which provide for share subscription funds in advance, by evaluating the company and by donating shares during the first formal financing cycle. 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.