Knowledge Base: Managing ASAs (and other convertible instruments)

Note: Each section corresponds to a video walkthrough. Use the videos alongside this guide for step-by-step demonstrations.

Jump to needed section here:

• Getting approval to issue ASAs and issuing an ASA
• Converting in a qualifying funding round
• Longstop conversion
• Off-platform ASAs
• Investor experience
• SAFEs, Warrants, and Convertible Loan Notes (CLNs)
• ASA Conversion Examples
• FAQs

Getting approval to issue ASAs and issuing an ASA

This section explains how to obtain approval to issue an ASA round and then create individual ASA agreements.

Step 1: Navigate to the ASA section

• Go to ASAs in the left-hand menu.

Step 2: Create approval for ASAs

• Click Create approval for ASAs.
• The platform will automatically set the raise deadline (12 months from purchase).
• Enter the amount you plan to raise via ASAs over the next 12 months. For example, £1,000,000 (it’s generally best to slightly overestimate).
• If this is your first round with no existing paperwork, leave the Existing paperwork option as None.
• Click Save to define the terms.

Step 3: Review and generate documents

• Refresh the page to see the generated documents. These will include board minutes, shareholder resolutions, and (if applicable) investor consent documents.
• Review the documents in the data room directly on the platform.

Step 4: Obtain shareholder and investor consent

• Send invitations to all shareholders to sign the required documents.
• As a founder, sign your board minutes and shareholder resolutions.
• Other founders and shareholders must also sign to reach at least 75% shareholder approval.

Note: If there is no prior funding, no investor consent is required. If previous rounds exist, you may need to select Yes for investor consent.

Step 5: Issue ASAs to investors

• On the ASA page, enter the relevant details if the investor is; SPV or business.
• Enter investor details (or person signing if SPV / business): name, email, and date.
• Define the ASA investment details:
  • Investment amount
  • Share class (usually Ordinary).
  • SEIS/EIS eligibility (if applicable).
  • Qualifying funding round and longstop date (default six months for S/EIS compatibility).
  • Pre-money longstop valuation.
  • Optional discount and valuation cap.
• Click Save to create the ASA.
• Review the ASA document to ensure accuracy before sending it to the investor.
• Send the ASA to the investor. They will receive an email to set up an account, sign an NDA, FCA disclaimer, and finally the ASA.

Tip: Both the discount and pre-money valuation cap are optional. If not applied, the ASA converts at the subscription price in the qualifying funding round, or at the longstop date.

Step 6: Signing process and receiving funds

Once sent:

• The founder can sign the ASA first
• The investor then signs after completing onboarding steps (NDA and FCA disclaimer)

After both parties have signed, the investor will be prompted to send funds.

Once funds are received, mark them as received on the platform by confirming with your password.

Step 7: Monitor ASA status

Track the status of each ASA directly on the platform, including:

• Signature progress
• Whether funds have been received

Converting in a qualifying funding round

This section explains how ASA investments convert when your company reaches a qualifying funding round.

Step 1: Confirm ASA signatures and funds

• Ensure both the investor and the company have signed the ASA.
• Once the investor sends funds, mark them as received on the platform using your password.
• Repeat for each ASA investor.

Note: If a qualifying funding round is not reached within the ASA’s longstop date (e.g., six months), the ASA will convert at the longstop valuation instead.

Step 2: Start the funding round

• Click Start initial round.
• See our guide on Completing a Funding round

Step 3: Add ASA investors to the round

• The platform will display a message indicating pending ASAs.
• Check that ASA investors have transferred funds and meet the qualifying round threshold (e.g., £150,000).
• Add investors who meet the threshold to the funding round.
  • The platform rounds down investment amounts to the nearest whole share.

Tip: ASA investors only convert once the qualifying funding round threshold is reached.

Step 4: Invite new investors

• Add any new investors to the funding round, ensuring they meet the qualifying threshold.
• Send email invitations to all investors to onboard, sign NDA, FCA disclaimers, and the term sheet.

Step 5: Lock and sign documents

• Once all investors are onboarded, lock the documents for signing.
• The platform will perform validation checks, e.g., disclosure and nominal value checks.
• All investors, existing shareholders, and founders sign the relevant paperwork.

Step 6: Finalise conversion

• Once all signatures are completed and new investor funds are received, mark the funds as received.
• ASA investments will convert into shares in the qualifying funding round.
• Check the cap table to confirm that all ASA investors have converted into ordinary shareholders alongside any new investors.

Tip: After conversion, ASA investors appear as ordinary shareholders, and the cap table will reflect the updated shareholding structure.

Longstop conversion

This section explains how ASA investments convert automatically at the longstop date if a qualifying funding round has not been reached.

Step 1: Identify ASAs approaching the longstop date

• The platform will notify the founder via email as the longstop date approaches - one month, one week, and one day prior.
• Go to the ASA page to see which ASAs are due for conversion.

Step 2: Convert ASA into shares

• Select the relevant ASA and click Convert to shares.
• The platform calculates the share price using the longstop valuation and the current number of shares in circulation.
  • The calculation is rounded down to the nearest whole share.
  • This calculation cannot be altered manually.
• You can also initiate conversion directly from the cap table page if preferred.

Step 3: Investor adherence agreement

• If the company has completed a prior funding round, the ASA investor must sign a shareholder adherence agreement.
• The investor receives an email notification to sign the agreement.
• Once signed, the conversion is complete.

Step 4: Confirm conversion

• Return to the ASA page from the founder view to verify that the ASA has been converted.
• Check the cap table to confirm that the investor has been added as an ordinary shareholder with the correct number of shares.

Off-platform ASAs

This section explains how to add and convert ASAs that were signed outside the platform before joining FounderCatalyst.

Step 1: Identify off-platform ASAs

• Off-platform ASAs are used when you have signed an ASA with an investor prior to using FounderCatalyst.
• Typically, this occurs when a few ASAs were completed with another service provider, and you now want to run a full funding round on FounderCatalyst.

Tip: Adding off-platform ASAs allows them to convert automatically in your funding round.

Step 2: Add the off-platform ASA to the platform

• Go to the cap table page and click Add off-platform ASA.
• Enter the investor details, investment amount, and longstop date.
  • The platform defaults to a six-month longstop date, but you can adjust this to match the original ASA.
• Save the investment.
• The off-platform ASA will now appear in your list of ASAs with its longstop date, investor name, and investment amount.

Step 3: Include off-platform ASA in a funding round

• Start your funding round as usual.
• The platform will display a pending ASA message.
• Select your off-platform ASA to include it in the funding round.
  • This allows the ASA to convert automatically if the qualifying funding round threshold is met.

Step 4: Longstop conversion for off-platform ASAs

• The founder receives email reminders as the longstop date approaches - one month, one week, and one day before.
• On the longstop date, go to the cap table page and click Convert.
• The platform calculates the share price based on the longstop valuation and current shares in circulation.
  • This calculation is automated and cannot be altered manually.
• If a prior funding round exists, the investor will need to sign a shareholder adherence agreement.

Step 5: Confirm conversion

• Once the investor signs the adherence agreement, the ASA is converted, and they are added to the cap table as an ordinary shareholder.
• Verify the correct number of shares and confirm that no further off-platform ASAs remain.

Investor walkthrough

This section explains the process from an ASA investor’s perspective, covering account setup, document signing, and fund transfer.

Step 1: Accept invitation and create account

• The ASA investor receives an email invitation from the founder.
• Click Accept invitation to create a platform account.
• Complete the account setup - this typically takes only a few minutes.
• Create a digital signature as part of the onboarding process.

Step 2: Review and sign documents

• Review and sign the non-disclosure agreement (NDA).
• Complete the FCA disclaimer.
• Access your account dashboard, which includes:
  • Help and support resources
  • Knowledge base guides
  • Data room files relevant to your investment
  • Cap table and actions required

Step 3: Sign the ASA

• Review your ASA agreement carefully.
• If satisfied, sign the ASA digitally via the platform.

Step 4: Transfer funds

• After signing, you will receive instructions to transfer the investment funds to the company.
• An email reminder will confirm the requirement to send funds if not done immediately.
• Complete the bank transfer according to the provided details.

Tip: This workflow ensures ASA investors are fully onboarded, their agreements are executed, and funds are securely received, streamlining the investment process for both founders and investors.

SAFEs, Warrants, and Convertible Loan Notes (CLNs)

This section explains how to manage convertible instruments (CLNs, SAFEs, and warrants) on the FounderCatalyst platform and how they are disclosed in funding rounds.

Step 1: Adding to the cap table

• Before starting a funding round, you can add convertible instruments to your cap table:
  • Convertible loan notes (CLNs)
  • SAFEs (Simple Agreements for Future Equity)
  • Warrants
• Enter the holder’s details (e.g., number of shares) and click allocate.
• This adds the instrument to the cap table, showing its potential impact on dilution and future funding rounds.

Note: The holder does not need to have a platform account at this stage.

Step 2: Post-funding round limitations

• Once a funding round has started, you cannot add new SAFEs, CLNs, or warrants to the cap table.
• If a new instrument is signed after a round has started, you can raise a support ticket to have it added.

Step 3: Disclosure in warranties

• Any SAFEs, CLNs, or warrants not included in the cap table should be disclosed via the warranties and disclosure process.
• See our guide Warranties and Disclosures
• Identify the relevant warranty (e.g., 1.3) and add a specific disclosure, including:
  • Instrument type (e.g., ASA, SAFE, CLN)
  • Date of agreement
  • Reference to the associated documents in the disclosed items folder
• Save the disclosure to ensure it appears in the disclosure letter included in the funding round paperwork.

Step 4: Organising documents in the data room

• Create a folder in the data room for each instrument type (e.g., “Advanced Subscription Agreements”).
• Upload the relevant agreements and supporting documents.
• Ensure the disclosure in the paperwork references this folder.

Tip: This approach ensures all convertible instruments are accounted for, either in the cap table or via formal disclosure, maintaining clarity for investors and compliance in the funding round.

ASA Conversion Examples

1. Conversion at the funding round valuation (subscription price)

In this ASA, the founder has not selected a discount or a valuation cap.

• The ASA will convert at the same price as all investors in the priced round.
• Conversion in a qualifying funding round = Subscription price. If no qualifying round occurs in 6 months, the ASA converts at the longstop valuation of £1,200,000.

Scenario: £50,000 ASA investor, 2,667 shares in circulation

2. Conversion at a discount or PMV cap

This ASA includes a 10% discount and a £2,500,000 valuation cap.

• The ASA converts at the lower of:
  • Subscription price discounted by 10%
  • Subscription price based on the £2,500,000 valuation cap

Scenario: £50,000 ASA investor, 2,667 shares in circulation

Key Takeaways:

• At the longstop date, both ASAs convert to the same number of shares (discount and cap irrelevant).
• In a qualifying round, ASA 2 (with discount/cap) gives more shares at lower effective valuation.
• The valuation cap protects investors if the funding round valuation is higher than expected.

FAQs

What do I do for non-UK investors?

For non-UK investors, you can remove any clauses that relate to SEIS or EIS. If you like, you can also extend the six-month longstop date to give yourself more flexibility.

Can you convert an ASA early?

Technically, yes, it is possible to convert an ASA before the longstop or a qualifying funding round. However, this effectively varies the agreement and could pose a risk to SEIS/EIS compliance. HMRC generally expects ASAs to convert only after the six-month period.

What if an investor wants to invest both SEIS and EIS, for example a £300k investment?

When it comes to ASAs, it’s the date they convert that matters, so EIS ASAs must convert after SEIS ASAs.

In this example, it’s best to structure the investment as two separate ASAs: one for SEIS (around 5.5 months) and one for EIS (6 months). The conversion dates are independent, so it’s fine for the funds to be transferred on the same day.

How do ASAs affect the gross assets test?

To qualify for SEIS or EIS, gross assets must be below £350k or £30m respectively at the point of share issue. Gross assets include tangible fixed assets and current assets at full value (no depreciation), plus acquired intangibles.

Money received via SEIS or EIS ASAs does not count towards the company’s gross assets until the shares are actually issued, see SEIS VCM 34100.

One practical tip: if you’re raising both SEIS and EIS funds at the same time, spend the EIS funds first before issuing any SEIS shares. This way, the SEIS ASA won’t inadvertently contribute towards your gross assets and affect eligibility.

What’s the difference between ASAs and Agile funding rounds?

With ASAs, you need to issue a new agreement for each investor, and each ASA has its own conversion trigger. Agile rounds are simpler: investors sign a single Adherence Agreement, and equity is issued immediately. This means investors can reclaim S/EIS more quickly and the whole process is faster and more streamlined.

Should I add ASAs to the Data Room?

Yes, it’s a good idea to upload your ASA agreements to the Disclosed Items folder in the Data Room. This ensures transparency and lets potential investors see any existing commitments before they invest. ASAs created through the platform will also automatically appear in the cap table.

Are ASAs SEIS or EIS eligible?

Yes, ASAs can be SEIS or EIS eligible, but careful planning is essential. Make sure to use all of your SEIS allocation before issuing any EIS ASAs. Also, keep an eye on the longstop date; if an ASA converts too early, it could unintentionally trigger EIS instead of SEIS.

Are there risks with ASAs?

Yes, there are some risks to be aware of. For more detail, see our article For (S)EIS investors, are ASAs the Devil’s Work? which explains the key issues.

My ASA didn’t convert in the initial round but will in Agile - how does that work?

You’ll need to check the definition of “Qualifying Financing” in your ASA to see whether it works on a cumulative basis or as a one-off. Most ASAs, including those on FounderCatalyst, are cumulative. This means that once the threshold is reached through subsequent investments, the ASA will convert at the subscription price during the agile round.