Advance Subscription Agreement
Secure advance funding and boost your business in the process.
An Advance Subscription Agreement (or “ASA”) allows an investor to pay in advance for shares that they will receive at a later date. Your Advance Subscription Agreement will set out the terms of the investment, when the investment will turn into shares, and under what circumstances. Simple stuff.
In a nutshell, an ASA converts to shares later, allowing time to grow a business’s future valuation.
When to use an advance subscription agreement
Qualifying funding round
ASAs usually mean that the shares will be issued to an investor at a discount per share in the next funding round, subject to the business achieving an agreed funding target for that round.
Quick injection of cash
Extend your runway at a mission-critical time. ASAs tend to be a relatively short agreement which is quicker to negotiate with investors. You also don't need to obtain a valuation of your business, which allows the ASA process to move at pace.
Investors can prefer advanced subscription agreements because the shares issued in accordance with an ASA are usually issued at a discount.
An ASA can qualify for SEIS/EIS relief, which can be particularly attractive for investors. However, be mindful that the longstop date for the conversion to shares should not be more than 6 months after the date of an ASA.
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