THE EIS shares must be subscribed, i.e. they must be newly issued shares and not shares sold by an existing shareholder. Underwriting shares under the Enterprise Investment Scheme requires some formality and it is therefore common for the parties to enter into a subscription and shareholder agreement. Pre-subscription implies that in exchange for the acquisition of a share purchase right, an investor transfers funds to a company 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. It is important to note that ASAs do not allow the refund of the subscription payment and cannot be varied, cancelled or reassigned. 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. In this context, the „link“ is not defined, but it is assumed that anyone entitled to acquire more than 30% of the company`s share capital. What should a pre-food contract include? Tags: Pre-registration contract, SEIS/EIS-Compliance This subscription contract is concluded between (1) the (s) founder (s), (2) the investor (s) and (3) the company. It defines the conditions under which the investor (s) will subscribe shares in the company and how the transaction will be managed after the subscription. Investors who obtain agreements from the founders, particularly with regard to the management of the company, are likely not to jeopardize their relief of the burden on eis and their guarantees regarding the company in which the investments are made.
ASAs are often used when a company collects money outside a funding cycle, i.e. at a time when the value of the shares is not easy to determine. An ASA allows investors to pay early subscription funds to a company, with the company`s shares being issued later (usually the next round of financing, the number of shares issued on that date being based on their value). In addition, the guidelines state that the HMRC ASA, which is suitable for SEIS and/or EIS, will only be considered appropriate unless the agreement is reached: certain key elements of the agreement must be considered by both parties in the negotiations. Assuming that the amount invested has already been agreed, the most important point on which the parties must reach an agreement is probably what makes a funding cycle „qualifying“. – does not allow the subscription to be refunded under any circumstances; – Can`t vary, cancel or assign; – Does not carry any interest; and – has a longstop date (no more than 6 months from the date of the agreement). Formalizing participation can take a long time and involves an effective evaluation for the company.