Advance subscription agreement (ASA)
An investor pays now for shares that the company will issue later, usually at the next funding round. If set up correctly, it can qualify for SEIS or EIS tax relief, unlike most convertible loan notes.
- Shares
How it works
With an ASA, an investor pays money to your company now, and in return receives shares at a later date, typically at the next priced funding round. Like a convertible loan note, it lets you raise money without agreeing a valuation now. Unlike a loan, there is no debt to repay.
For an ASA to be acceptable for SEIS or EIS, HMRC expects it to:
- not allow the money to be refunded in any circumstances;
- not be able to be varied, cancelled or assigned;
- carry no interest;
- have a longstop date by which the shares must be issued, which HMRC generally expects to be no more than 6 months after the ASA is signed.
An ASA used to convert a debt or other obligation into shares will not be eligible.
Upsides and downsides
Upsides
- No valuation needed now
- Not a loan, so nothing to repay
- Can qualify for SEIS or EIS, which UK angels often expect
Downsides
- Any agreed discount gives investors cheaper shares than later investors
- Strict conditions to keep SEIS or EIS eligibility
- A short longstop date means you must complete the next round or issue shares soon
Risks
- Breaking HMRC's conditions can cost investors their tax relief
- Founders are diluted when the shares are issued
What it costs
- How it is priced
- Shares issued later, at a price set by the agreement or the next round
- Costs that are easy to miss
- Legal fees to draft an agreement that meets HMRC's conditions
- Any discount you agree gives ASA investors cheaper shares than later investors
Agreed with each investor. SEIS and EIS limits on how much the company can raise still apply.
Does it fit?
Could fit when
- You need money before your next round and investors want SEIS or EIS relief
- It is too early to agree a valuation
Unlikely to fit when
- You will not issue shares within about six months
- Investors want interest or the right to their money back (a convertible loan note may fit better)
Who can use it
- Business types: Private limited company, Public limited company
- Open to businesses with no sales yet
- For SEIS or EIS, the agreement must meet HMRC's conditions (no refunds, no interest, no variation, a longstop date)
- The company must meet SEIS or EIS conditions when the shares are issued
Am I ready?
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- Agreement meets HMRC's conditions
- SEIS or EIS advance assurance
- Plan for the next round
Regulation and protections
There is no compensation scheme for you or the investor. Your protection comes from the agreement, so take legal advice before you sign.
Inviting people to invest is a financial promotion, and UK rules restrict it. Check the rules before you approach investors you do not know.
Types of provider: Angel investors and syndicates; Existing shareholders; Early-stage funds.
Also consider
Sources
- HMRC Venture Capital Schemes Manual VCM12025: EIS advance subscription agreements · checked 7 October 2026
- HMRC Venture Capital Schemes Manual VCM33025: SEIS advance subscription agreements · checked 7 October 2026
- FCA: PS22/10 Strengthening our financial promotion rules for high-risk investments · checked 7 October 2026