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. 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. In addition, the Guide states that HMRC ASA will not deem it appropriate for NRS and/or EIS, unless the agreement has been concluded: one solution for the issue was for investors to enter into Advance Subscription Agreements (ASAS) with a company in order to disburse subscription funds to the company, with the shares being issued at a later date and for valuation, which is fixed at the time of the actual issue of the shares. 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. The introduction of an agreement makes it possible to speed up the transfer of funds without the formal protocol, which will then be concluded later.
- Does not allow in any case to refund the payment of the subscription; - Cannot be modified, cancelled or assigned; - Does not bear interest charges; and - has a longstop date (probably no more than 6 months from the date of the agreement). To stage the scene, we wanted to quickly address some of the things to consider in the decision between a structured cycle of convertible bonds (using a convertible loan), a convertible share round (with ASA, a simple agreement for the future capital cycle (SAFE) and a share price cycle (using a term sheet, a letter of subscription or agreement). For example, amended articles of association, etc.). Advance Subscription Agreements (ASAS) is sometimes used to quickly raise funds for a company, at a time when the value of shares is not easy to determine. An ASA allows investors to disburse subcontracting funds to a company at an early stage, with shares being issued later. The conditions of such an ASA will therefore not be complex. New investors should take into account the terms of the articles of association of the company in which they are investing and the shareholders` agreement (if any), as the investor is subject to those documents once the company has issued the new shares and allocated them to the investor. Tags: Pre-subscription agreement, SEIS/EIS compliance * Please note that this article has been verified in accordance with HMRC`s new guidelines on early subscription contracts of 30 December 2019. As a reference, you will find the guidelines eis here and the SEIS guidelines here The formalization of a stake in the capital can take a long time and involves the effective definition of a valuation for the company. With the availability of the Seed Enterprise Investment Scheme ("SEIS") and "ICE") for tax breaks for start-ups, startups are raising more private capital than ever before and pre-subscription agreements are still more popular than a quick and easy way to raise funds without necessarily agreeing on an assessment with investors. .