Today, 13th October 2022, FounderCatalyst is announcing the release of a free Advance Subscription Agreement (“ASA”), available to download from its website, saving start-ups thousands of pounds on their funding journey. The latest free-to-access release from FounderCatalyst follows the recent rule changes designed to boost investment as part of the Government’s Growth Plan.
An ASA is useful to raise money before a formal funding round, or between rounds. The investor pays in advance for shares that they will receive at a later date. They allow a founder to defer the date at which they have to finalise the valuation of the company and allow them to take on funding before a priced round is undertaken.
Based on what we know so far (and is subject to change), the new measures announced by Kwasi Kwarteng on 23rd September 2022 include key updates to the Seed Enterprise Investment Scheme (“SEIS”) from April 2023. This means start-up businesses who have already raised £150,000 in SEIS, hit the 2-year trading limit, and are currently under 2.5 years since starting to trade, can still use SEIS.
Here are some of the key rule changes that we believe are important, but you can find out more in a post which will be uploaded to our site as and when we hear more.
As documented by HMRC in VCM33025, a carefully crafted ASA can be compatible with the SEIS and EIS schemes. Therefore, assuming a business has: 1) raised £150,000 under SEIS; 2) raised no EIS investment yet; and 3) been trading for less than three years as of the 6th of April 2023, the business should be able to raise a further £100,000 under SEIS using our ASA.
There are numerous caveats and ‘gotchas’ surrounding the above plan; for example, the business remaining within the tangible asset and number of employee tests. If in doubt, founders are encouraged to contact us to discuss your specific circumstances.
It is also worth re-iterating that the Government plans are yet to be enshrined in law, so there may be some unanticipated nuances. These plans are also subject to change. There is therefore a risk that you and your investors sign up to an ASA in good faith, but find that SEIS is unavailable. In this event, investors may be able to convert their investment into EIS instead.
Sam Simpson, COO at FounderCatalyst said: “Whilst we aren’t always great fans of ASAs from an investor’s point of view (found out why), an interesting use case has emerged from the changes announced in the mini-budget which allow founders to raise up to £250k in total under the SEIS scheme. We know that making the most of this opportunity is important for start-up businesses on their funding journey, so hope this new free ASA resource is one more way we can help founders find time- and cost-effective ways to meet their goals.”
The free-to-use ASA is one more way FounderCatalyst is helping start-up businesses. Download the ASA now at https://www.foundercatalyst.com/free-stuff, where you can also access documents including a Founder Collaboration Agreement, Forecast Models, Advisor Agreements and Non-disclosure Agreements, as well as a customised Term Sheet.
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