Advance Subscription Agreement – Fixed Price
Advance Subscription Agreement for investment in a private limited company with the conversion price based on a fixed price per share.
About this document
This document is an advance subscription agreement for use where the conversion price at which the advance subscription amount will convert into shares is an agreed fixed price per share.
Prior to entering into this ASA, the parties will need to consider and agree:
- longstop date: the longstop date on which (and in the absence of a prior qualifying financing round) the ASA will automatically convert into shares
- qualified financing round: the minimum amount of funding which the company must raise before that funding round will count as the qualified financing round under the ASA which results in the conversion of the advance subscription into shares
- subscription amount: the amount of the investor’s advance subscription
- subscription price: the agreed amount per share at which the investor’s advance subscription will convert into shares in the company
- advance subscription terms and payment
- conversion on defined events of a qualifying financing round, the sale of the company or on a longstop date
- conversion price under all circumstances being an agreed fixed price per share
- warranties regarding the investor’s compliance with Financial Services and Markets Act 2000 regime regarding financial promotions
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Further Information – Background
What is an Advance Subscription Agreement?
An Advance Subscription Agreement is a way in which a company can raise investment quickly prior to an anticipated investment round.
Under an advance subscription agreement (ASA):
- an investor provides investment funding to the company in the form of an advance subscription for shares
- the advance subscription will convert into shares in the company in the future on the occurrence of the company’s next funding round (or earlier in certain circumstances)
- the conversion price can be based on the price per share of the company’s next investment round, with potentially an agreed discount to the investment round price and also a cap on the investment round valuation of the company
- as an alternative, the conversion price for an ASA can be an agreed fixed amount, especially where the company is about to conclude an investment round at a known price per share but requires funding for the period prior to the conclusion of the investment round
For detailed discussion regarding the purpose of advance subscription agreements and their benefits and disadvantages for investors and the company, see our category page.
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