In addition, the existence of ongoing advanced underwriting agreements may discourage future investors in subsequent funding rounds, as ASA holders receive shares at a discount and thus a higher percentage of equity for pre-paid funds than new investors. You can create a SeedFAST agreement on SeedLegals in less than 10 minutes. SeedFAST agreements are designed to be quick and easy, so anyone can establish their agreement at any time. But be sure to check the questions and tutorials carefully and click the chat button for any questions – we`re here to help. Our team of legal and financial experts will verify your agreement as soon as it is ready to be signed for your investors. Log in to create a SeedFAST. Seed and start-up companies often need early means in their life cycle to launch a concept to develop their commercial offer or start trading. Sometimes they obtain financing through convertible bonds (CLNs) that can be converted into shares in the future. Another way to fund anticipated activities is the Advanced Subscription Agreements (ASAS), which provides for share subscriptions in advance, with the entity being valued and shares issued in the first formal funding round. Using an ASA has benefits for both investors and the company.
It can be more convenient for the company, because in order to be able to issue shares, a company must be formally and professionally valued to determine the value of the shares. This can be a lengthy process that can prevent the company from maintaining the investment. For ASA investors, funds presented under an advanced sub-registration agreement may be eligible for tax relief under the EIS and SEIS systems, unlike financing under a CLN. Since a CLN may require the repayment of funds to the investor, the capital is not considered “threatened” and is therefore not covered by EIS or SEIS. The investor will also receive a discounted price for the shares as soon as they are finally issued. A: Investing in a company through an Advanced Subscription Agreement (ASA) is a simple equity agreement. Investors must pay in advance for the shares awarded in a subsequent funding round, with a discount on the pre-money valuation in accordance with the Advanced Subscription Agreement. Unlike a convertible loan note (CLN), funds invested through an ASA cannot be repaid in cash. As such, an ASA is an equity fund, while a CLN can technically be both. Upon pre-subscription, an investor pays funds to a company in return for acquiring a right to purchase shares at a future date (usually the next qualified funding round). Postponing the evaluation process for multiple fundraising cycles allows the company to raise funds faster.
Investors often enjoy a higher return on their investment, as they typically receive a 10-30% discount on the price per share in the next funding round to compensate for their pre-issuance. Without these characteristics, hmrc will likely consider that pre-subscription is effectively a loan (and that loan conversions are not qualified for SEIS or EIS). . . .