ASA (Advance Subscription Agreement) (ASA)

TL;DR

UK SEIS/EIS-compatible alternative to a SAFE: cash paid up-front for shares issued at the next round, with a 6-month longstop to keep relief.

An Advance Subscription Agreement (ASA) is the UK's tax-friendly answer to the US SAFE. The investor pays cash now in return for shares issued at the next priced round (usually with a discount and/or valuation cap), but with three SEIS/EIS-mandated quirks: the longstop date can be no more than six months out, the agreement is irrevocable and non-refundable, and the shares must be ordinary equity issued at conversion.

The six-month longstop matters: if the next round doesn't close in time, the ASA must auto-convert at a pre-agreed default valuation — otherwise HMRC will deny SEIS/EIS relief. UK founders also frequently use ASAs when bridge-funding between SEIS/EIS rounds, since each round can use a separate ASA up to the company's annual cap.

Worked example

A UK pre-seed founder raises £150k via an ASA at a £4m valuation cap with a 20% discount, longstop date 31 March. Investors claim SEIS relief on the cash paid in November; the round priced at £6m in February converts the ASA into ordinary shares at the lesser of £4m cap or 80% of round price.

Common pitfalls

• Drafting a longstop date over six months — invalidates SEIS/EIS treatment.
• Adding a refund clause or 'most favoured nation' rights that HMRC sees as breaching irrevocability.
• Stacking too many ASAs and breaching the £250k SEIS or £5m EIS annual company cap.

When this shows up in a pitch deck

Mentioned on the round structure slide for UK pre-seed/seed: 'raising £400k via ASA, SEIS/EIS-qualifying, longstop 6 months.'

Related terms

• SAFE — Y Combinator's Simple Agreement for Future Equity — a contract that gives an investor the right to equity in a future priced round, with no debt or interest.
• SEIS — UK tax-advantaged scheme giving angels up to 50% income-tax relief on up to £200k/yr invested into very early-stage UK companies.
• EIS — UK scheme offering investors 30% income-tax relief on up to £1m/yr (£2m if knowledge-intensive) in qualifying UK growth-stage companies.
• Advance Assurance — Non-binding HMRC pre-clearance that a UK company's planned share issue likely qualifies for SEIS or EIS, used to de-risk angel investment.
• Convertible Note — Short-term debt that converts into equity at a future priced round, typically with a discount, a valuation cap, and an interest rate.

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