If such goals are not achieved, there is a long shutdown period (which should not exceed one year), when the investment is automatically converted and the shares are issued. An ASA is an agreement under which an investor agrees to make an upfront payment for the shares of a company. At some point in the future (usually as part of a future equity financing round, a sale of the company or, if both are not, a long-term agreed date), the company will issue the shares to the investor. Unlike convertible bonds, which are debt, ASAs are pure stock agreements. ASAs bear no interest and are never refundable. Emer Hughes is a Senior Partner in the Corporate and Commercial team. She works on a wide range of corporate and commercial transactions, including advising on commercial agreements and shareholder agreements, corporate governance, corporate restructuring, asset and equity acquisitions, venture capital investments and junior stock listings. If you are involved in investments, whether as a start-up or as an investor, you will likely encounter an extended underwriting contract. So, what is an extended subscription contract and what should you consider when you withdraw one? The parties should consider whether, in addition to an eligible funding round or a long-term shutdown date, there are other circumstances in which shares should be automatically converted under the pre-subscription agreement, for example in the event of a sale of the start-up. In addition, an extended subscription contract may be preferable for an investor because shares issued under an early subscription contract are usually issued at a discount. Unlike a convertible bond, however, provided that the early subscription agreement is properly structured, the investor can still benefit from SEIS/EIS when the shares are issued.
A: Investing in a company through an Advanced Subscription Agreement (ASA) is a pure capital agreement. Investors are expected to prepay the shares awarded in a subsequent funding round at a discount to the valuation before money under the advanced subscription agreement. Unlike a convertible loan note (CLN), funds invested through an ASA cannot be repaid in cash. As such, an ASA is equity, while a CLN can technically be both. To set the stage, we wanted to briefly touch on some of the things to consider when choosing between a structured convertible bond round (using a convertible bond), a structured convertible bond (using ASA, a simple deal for a future stock turn (SAFE), etc.) and a share price round (using a term sheet, a subscription letter or agreement). amended statutes, etc.). Some points that startups and investors need to consider when negotiating an advanced subscription contract are: With an advanced underwriting agreement, the valuation issue shifts until the date of the next round of funding. However, the start-up must ensure that a valuation cap is included so that existing shareholders have some certainty as to the amount at which their stake will be diluted upon conversion. The investor must know the terms of the shareholders` agreement and the articles of association to which he will be subject once the investment has been converted and the shares of the start-up have been issued.
Using an ASA has benefits for both investors and the company. For the company, this can be more convenient, because in order to be able to issue shares, a company must be formally and professionally valued to determine the value of the shares. .