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what is an advance subscription agreement?
an advance subscription agreement (asa) formally documents an investor’s immediate investment in a company in exchange for shares, the investor’s entitlement to which will be calculated and issued in the future. advance subscription agreements are a form of equity financing (ie the investor will receive shares in the company in exchange for their investment, not a cash repayment).
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sample advance subscription agreement
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advance subscription agreement
dated
parties
of , , (the subscriber); and
a company incorporated in england and wales with registered number whose registered office is at , (the company).
the subscriber has agreed to make advance subscription funds available to the company for the purposes and on the terms set out in this agreement.
agreement
meanings
- in this agreement, the following definitions are used:
advance subscription funds
has the meaning given in clause 2 (advance subscription);
business day
a day other than a saturday, sunday or public holiday in england when banks in london are open for business; articles
means the articles of association of the company as of the date of this agreement;
business sale means a sale or transfer of all or substantially all of the business or assets directly or indirectly owned by the company by way of a sale or transfer of assets and liabilities;
conversion price means:
where conversion takes place pursuant to clause 6(a) (conversion), a price per conversion share equal to the lower of (i) a discount of per cent () of the subscription price or (ii) a price per share based on a pre-money valuation of £, rounded down to the nearest whole share;
where conversion takes place pursuant to clause 6(b) or 6(d) (conversion), a price per conversion share equal to the lower (i) of the last round price (if any) or (ii) a price per share based on a pre-money valuation of £, rounded down to the nearest whole share; and
where conversion takes place pursuant to clause 6(c) (conversion), a price per conversion share based on a pre-money valuation of £, rounded down to the nearest whole share;
conversion shares means either:
in the case of shares issued pursuant to clause 6(a) (conversion), the next round shares; or
in the case of shares issued pursuant to clause 6(b), (c) or (d) (conversion), ordinary shares;
eis
means the enterprise investment scheme as set out in part 5 of the income tax act 2007 starting at section 156;
electronic form has the meaning given in section 1168 of the companies act 2006;
exit
means either:
- a business sale;
a share sale;
a combination of a business sale and a share sale; or
a listing;
financing round
a subscription for equity in the company by one or more persons raising an aggregate of at least £ (excluding any subscriptions on conversion of this agreement or any other rights or securities convertible into shares in the company), which amount can be raised in one or in a series of fundraisings on or before the longstop date;
holder
in relation to shares, means the person whose name is entered in the register of members as the holder of the shares;
insolvency
means a situation in which:
- an order is made for the company’s compulsory liquidation; or
the company is placed into voluntary liquidation (otherwise than for the purpose of reconstruction or amalgamation); or
the company has an administrator or receiver appointed over the whole or any part of its assets or undertaking;
last round price
means the highest price per share issued in the most recent round of funding since the date of this agreement (if any);
listing
a public offering and sale of equity securities of the company (or a subsidiary or holding company of the company);
longstop date
from the date of this agreement;
next round shares
means, in respect of a financing round, the highest class of share issued in such financing round;
paid
means paid or credited as paid;
seis
means the seed enterprise investment scheme as set out in part 5a of the income tax act 2007;
shareholder
means a person who is the holder of a share;
shares
means shares in the company;
share sale means the sale of (or the grant of a right to acquire or to dispose of) any of the shares in the capital of the company (in one transaction or as a series of transactions) which will result in the purchaser of those shares (or grantee of that right) and persons acting in concert with them together acquiring a controlling interest (within the meaning of section 1124 of corporation tax act 2010) in the company, except where following completion of the sale the shareholders and the proportion of shares held by each of them are the same as the shareholders and their shareholdings in the company immediately prior to the sale;
subscription price
means, in respect of a financing round, the lowest price paid per next round share issued pursuant to such financing round (including for the avoidance of doubt any shares issued on conversion of any notes or other securities convertible into shares);
subsidiary
has the meaning given in section 1159 of the companies act 2006; and
writing
means the representation or reproduction of words, symbols or other information in a visible form by any method or combination of methods, whether sent or supplied in electronic form or otherwise.
advance subscription
- subject to the terms of this agreement, the subscriber agrees, on the date of this agreement, to make available to the company funds in an aggregate amount of £ (advance subscription funds), and the subscriber acknowledges that the advance subscription funds cannot be refunded under any circumstances.
- the company will apply the advance subscription funds towards its general working capital purposes so as to grow and develop its business, for the raising of additional financing, and for such other purposes as the company’s board may determine from time to time.
- the advance subscription funds shall be paid to the company to the following bank account:
bank name -
account number -
sort code -
- the company will procure all consents, waivers and shareholder resolutions necessary (pursuant to the articles) so as to enable the issue of shares in the capital of the company to proceed free of pre-emption rights or other restrictions.
conversion
- the advance subscription funds shall automatically convert into conversion shares at the relevant conversion price, and the company shall issue and allot to the subscriber (or as the subscriber shall direct) the number of fully paid conversion shares to which it is entitled:
- in the event of a financing round, immediately prior to the unconditional completion of such financing round; or
- in the event of an exit, immediately prior to the unconditional completion of such exit; or
- on the longstop date (if no financing round or exit has unconditionally completed on or prior to the longstop date); or
- in the event of an insolvency occurring before any of the events set out in sub-clauses (a) to (c) above, immediately prior to the occurrence of such insolvency event,
and (in each case) conversion shares so allotted and issued shall be in full satisfaction and discharge of all obligations of the company under this agreement to the subscriber and this agreement shall terminate automatically and immediately on completion of such conversion.
seis/eis
- if applicable, the company shall monitor its seis/eis status, use reasonable endeavours to ensure (so far as it is able) that any related tax reliefs continue to be available to the subscriber, and diligently fulfil all administrative requirements related to the company’s and the subscriber’s seis/eis qualifying investment.
representations and warranties
- the company represents and warrants to the subscriber that:
the company is a company duly formed, validly existing and in good standing under the laws of england and wales, with full corporate power and authority to enter into and perform its obligations under this agreement;
the company has full power and authority to enter into and perform its obligations under this agreement;
no consents or approvals of any governmental authority are required in connection with the execution or performance of this agreement by the company; and
entering into and the performance of this agreement does not violate the provisions of the articles, or any applicable law.
status of subscriber
- in entering into this agreement to acquire the conversion shares on the terms of this letter, the subscriber undertakes that:
- they are a resident in the united kingdom;
- they fall into one or more of the following categories of the financial services and markets act 2000 (financial promotion) order 2005 as amended (the “order”):
- a “certified high net worth individual” within the meaning of article 48(2) of the order, and accordingly they have signed a certificate in the form set out in part i of schedule 5 of the order within a period of 12 months prior to the date of this letter; or
- a “self-certified sophisticated investor” in article 50(a)(1) of the order, and accordingly they have signed a certificate in the form set out in part ii of schedule 5 of the order within a period of 12 months prior to the date of this letter, or
- they are a person to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the financial services and markets act 2000) in connection with the issue or sale of any securities may otherwise lawfully be communicated or caused to be communicated;
- they have received sufficient information from the company with respect to all matters they consider material to their investment decision, they have had the opportunity to ask questions of the management of the company in relation to their investment decision and all such questions have been answered to their satisfaction; and
- they have sufficient knowledge and expertise in business, tax and financial matters to be able to evaluate the risk and merits of an investment in the company, or they have sought such advice as they consider necessary from a professional adviser with such knowledge and expertise.
communications
- unless otherwise expressly stated herein, all communications under this agreement will be in writing and may be made by letter or email.
- any communication by letter to be made or delivered by one party to the other(s) will be made or delivered to that other party at the address shown next to its name on the first page of this agreement or to such other address as may from time to time be notified by one party to the other(s) in accordance with this clause and any communication by email to be made by one party to the other(s) will be made to that other party at the email address as may from time to time be notified by one party to the other(s) in accordance with this clause.
- any communication made or delivered under this agreement will be deemed made or delivered:
- when received, in the case of an email;
- when left at the relevant address, in the case of a personally delivered letter; or
- two business days after dispatch, in the case of a letter sent by prepaid first-class post in an envelope addressed to the relevant address.
general
- for the avoidance of doubt, no interest is payable on the advance subscription funds in any circumstance. no amount of the advance subscription funds is repayable by the company in any circumstance but such amount may be converted into shares in the company as set out in the section entitled 'conversion' above.
- each party shall be responsible for its own costs in connection with the negotiation, preparation, execution and performance of this agreement and any documents (including documents sent or supplied in electronic form) referred to in it.
- if any court or competent authority finds that any provision of this agreement (or part of any provision) is void, invalid, illegal or unenforceable, that provision or part-provision shall, to the extent required, be deemed to be deleted, and the validity and enforceability of the other provisions of this agreement (and, as the case may be, the remainder of the relevant provision) shall not be affected.
- if any void, invalid, unenforceable or illegal provision of this agreement would be valid, enforceable and legal if some part of it were deleted, the provision shall apply with the minimum deletion necessary to make it legal, valid and enforceable.
- this agreement shall automatically terminate in accordance with the section entitled 'conversion' above and is not capable of variation, cancellation or assignment under any circumstances.
- this agreement may be executed in counterpart, and this has the same effect as if the signatures on the counterparts were on a single copy of this agreement. the exchange of a fully executed version of this agreement (in counterparts or otherwise) by electronic transmission in pdf format shall be sufficient to bind the parties to the terms and conditions of this agreement and no exchange of originals is necessary.
governing law
- this agreement and any dispute or claim arising out of or in connection with it or its subject matter form formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with the law of england and wales. the parties irrevocably agree that the courts of england and wales shall have exclusive jurisdiction to settle any claim, dispute or issue (including non-contractual claims) which may arise out of or in connection with this agreement.
this agreement has been entered into on the date stated at the beginning of it.
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about advance subscription agreements
learn more about making your advance subscription agreement
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how to make an advance subscription agreement
making your advance subscription agreement online is simple. just answer a few questions and 2022世界杯32强抽签时间 will build your document for you. when you have all the information about the investment prepared in advance, creating your document is a quick and easy process.
you’ll need the following information:
the company and the investor
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what is the company’s name, address, and company number?
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who is the company’s signatory (ie the person who will sign the agreement on the company’s behalf)?
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what is the investor’s name and address?
the investment
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how much is the investor investing in the company?
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what are the company’s bank account details for the account into which the investment will be paid?
funding rounds
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what is the funding target that must be met (ie the amount of money that must be raised) for a relevant funding round to be successful?
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if conversion occurs at the end of a successful qualifying funding round, what discount will the investor be given on their converted shares - 10%, 20%, or 30%?
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what is the valuation cap for conversions occurring at the end of a funding round?
insolvency, exit, and longstop
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what is the valuation cap for conversions occurring due to an exit event or an insolvency event?
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what is the longstop date (ie how many months following the date of the agreement)?
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what is the valuation cap for conversions occurring on the longstop date?
the advance subscription agreement
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what is the date of the agreement?
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common terms in an advance subscription agreement
advance subscription agreements set out the terms of an investment in exchange for shares that will be issued to the investor in the future. to do this, this advance subscription agreement template includes the following terms and sections:
parties
the agreement starts by identifying the investor (referred to within the agreement as the ‘subscriber’) and the company. these are the parties to the agreement.
meanings
this definition table assigns specific meanings to key terms used throughout the agreement. when these terms (eg 'conversion price’, ‘exit’ or ‘share sale’) are used capitalised throughout the agreement, they carry the meaning they’re given in this table.
advance subscription
this section sets out the main commitments made under the agreement. primarily:
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the investor’s commitment to providing a specified amount of funding to the company as an investment and their acknowledgement that these funds will not be returned to them (eg as they would under a debt financing arrangement)
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the company’s commitment to ensuring the investor’s shares in the company can be issued free of restrictions (eg pre-emption rights) by, for example, procuring necessary shareholder resolutions
the section also sets out how the company is committed to using the funds (eg to grow its business) and how the investment payment can be made.
conversion
this section sets out when conversion will occur (ie when the investor’s investment will be automatically converted into shares issued to them). this will be done at the relevant conversion price, details of which are set out within the meanings table for each conversion scenario.
the section sets out the four instances in which conversion may occur and when each is relevant (eg which takes priority). these are: immediately prior to completion of a successful financing round (as determined with reference to your specified funding target), an exit event, or an insolvency event; or on the longstop date.
it’s also clarified that the company’s obligations to the investor under this agreement will be discharged when the shares are issued (so the company doesn’t need to, for example, pay the investor any cash back).
seis/eis
the company commits to helping the investor to receive tax benefits under the seed enterprise investment scheme (seis) or the enterprise investment scheme (eis), where possible. for example, the company will fulfil necessary administrative requirements relative to the investment.
representations and warranties
this section contains various warranties (ie promises or statements of fact) that the company is making to the investor by signing this agreement. for example, that it is a valid company with full authority to perform its obligations under the agreement (eg by issuing shares).
status of subscriber
similar to the company’s warranties above, this section sets out statements made by the investor. for example, that they fit within one of the certain categories of person set out in the financial services and markets act 2000 (financial promotion) order 2005. this essentially means that they are adequately knowledgeable about and prepared for the investment they’re making. for example, because they are a certified high net worth individual, a self-certified sophisticated investor, or they have sufficient expertise in business, tax, and financial matters to be able to evaluate their investment (or they have sought advice from a professional adviser with such knowledge).
communications
this section sets out how any notices or other similar communications that are given under the agreement should be delivered (eg in writing and by letter or email).
general
this section deals with various other points of law that govern how this agreement operates. for example, stating that:
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no interest will be owed on the investor’s investment nor will any of the amount be repaid in cash
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if part of the agreement is found to be void or illegal or similar the rest will remain valid and enforceable
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the agreement will terminate (ie end) automatically when conversion occurs (ie when shares are issued)
governing law and jurisdiction
this section states that the legal system of england and wales must be used to resolve any disputes (ie this is the agreement’s ‘jurisdiction’).
this agreement has been entered into on the date stated…
the agreement ends by providing spaces for both parties to sign and date the document to make it legally binding.
if you want your advance subscription agreement to include further or more detailed provisions, you can edit your document. however, if you do this, you may want a lawyer to review the document for you (or to make the changes for you) to make sure that your modified advance subscription agreement complies with all relevant laws and meets your specific needs. use 2022世界杯32强抽签时间 ’s ask a lawyer service for assistance.
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legal tips for companies and investors
consider all factors when setting your valuation caps
valuation caps can be used as a mechanism for allocating risk. the level at which a cap is set influences how much the investor stands to gain and how much control the company must give to the investor when conversion occurs. when deciding how high to set a valuation cap, make sure you take all relevant considerations into account and negotiate for a cap that represents a level of risk that you’re happy with. for example, consider any imminent societal or regulatory changes that are likely to impact the company’s performance and the company’s expansion plans.
understand when to seek advice from a lawyer
in some circumstances, it’s good practice to ask a lawyer for advice to ensure that you’re complying with the law and that you are well protected from risks. you should consider asking for advice if:
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the shares to be issued on conversion are preference shares
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the company isn’t based in england or wales (eg if it’s based in scotland)
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the investor is based outside of england, wales and scotland
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advance subscription agreement faqs
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what is included in an advance subscription agreement?
this advance subscription agreement template covers:
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the investor’s details
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the company’s details
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the amount being invested
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conversion price discounts
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valuation caps
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the longstop date
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the funding round target
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why do i need an advance subscription agreement?
advance subscription agreements are generally used when a company is looking to raise funds quickly, usually to prove a concept, in anticipation of an equity funding round in the near future. they can offer a quick and easy way to raise money without the company necessarily agreeing a valuation with investors.
an advance subscription agreement allows a company to minimise the costs of raising money when budgets are tight, as shares need not be issued immediately. if your company is looking to take investment in this way, using a formal written asa is a good way to do so in a clear and legally risk-averse manner.
equity funding via an asa can be useful when a company does not want the burden of debt investment (ie where investment is given in return for an obligation to repay the amount lent) or when an investor believes in the company’s prospects and wants a share of its successes (ie by owning shares in it). certain asas (including this one) also allow investors to be eligible for tax relief under the seed enterprise investment scheme (seis) and/or the enterprise investment scheme (eis).
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what is an investor?
an investor is a person who is receiving shares in the company in return for their investment. this asa is appropriate for investors who are individuals (eg not other companies). the investor is referred to within the document as the ‘subscriber’.
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where can investors be based?
this advance subscription agreement is designed to be used for investors based in england, wales, or scotland only. this is due to the complexity of dealing with investors based abroad (eg because of complex tax implications). if an investor is based abroad, you may need to seek advice or help from a specialist lawyer.
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what is the conversion price discount?
the conversion price is the price (ie the amount of the investment capital) that will be exchanged for each share issued to the investor at the time of conversion. the time of conversion will depend on which event occurs first of the successful completion of a new funding round, an exit (eg a share sale), an insolvency event, or the longstop date.
the conversion price when conversion is part of a funding round should generally be at a discount to the usual price per share, to compensate the investor for the risk they have taken by transferring funds in advance and by investing early. the conversion price discount is usually between 10% and 30%, with 20% being the most common discount.
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what are valuation caps?
a valuation cap is the maximum value of the company at which the investor’s investment can convert into shares. this protects the investor’s investment in that, if the company is valued at more than the cap at the time of conversion, the investor will receive a number of shares based on calculations that use the cap as a substitute for the company’s actual valuation. essentially, it enables them to receive more shares in exchange for their investment than they might otherwise if the company is valued at more than expected (eg if its shares become worth more).
different valuation caps can be set for the conversion to shares due to different events. for example, a valuation cap may be set for conversions:
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immediately before the completion of a qualifying funding round
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immediately prior to an insolvency event
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in the event of an exit by the company (eg if the company is sold or made public (ie listed on a stock exchange))
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on the longstop date
a valuation cap for an exit or insolvency event, and often for conversion on a longstop date, should generally reflect a more realistic (ie less optimistic) valuation of the company. this is typically lower than the valuation cap set for a funding round.
valuation caps are included in advance subscription agreements to ensure that the existing shareholders have some certainty as to the level to which their shareholding will be diluted on conversion (based on how many shares are likely to be issued to the investor). valuation caps also ensure that an investor does not end up with an unexpectedly low-value shareholding if the company is successful in achieving a high valuation at the next funding round or in certain other events (eg insolvency).
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how is a funding round valuation cap set?
setting the funding round valuation cap is a matter of negotiation between the investor and the company. the parties should aim to reach a compromise between the company's current valuation (ie the pre-money valuation) and the valuation it expects to reach at the qualifying funding round (ie the post-money valuation).
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when will the investor’s investment be converted into shares?
under this advance subscription agreement, if the company completes a successful qualifying funding round (eg an equity funding round raising a specified amount of money) after the investor’s investment, the conversion will take place immediately before the round is completed (once it is unconditionally successful). this is the ideal situation.
if an exit occurs before a qualifying funding round, conversion will take place immediately before the exit is completed. exits include share sales and/or asset sales of the company and public listings.
you can also set a ‘longstop date’ in your agreement. if no qualifying funding round or exit occurs before the specified longstop date, conversion will occur on this date.
if the company becomes insolvent before a qualifying funding round is completed (eg because no funding thresholds have been met), an exit is completed, or the longstop date occurs, conversion will occur immediately before the insolvency event. in the event of insolvency, the investor will become a shareholder and can make a claim on the company's assets along with the other shareholders.
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what is the longstop date?
the longstop date is a date that will trigger the allocation of shares to the investor regardless of whether a funding round target is achieved or not. this ensures that the investor receives shares for the investment and that the company doesn't delay share allocation to the investor.
a longstop date should generally not be more than 6 months from the date of the advance subscription agreement.
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