Advanced Subscription Agreements (ASA) explained

Raising early-stage funding requires speed and flexibility. Not to mention, founder-friendly terms. That’s where Advanced Subscription Agreements (ASAs) come into play.

In fact, whether you’re a startup preparing for your first round of funding or an investor looking for a tax-efficient way to support early growth, ASAs are a popular choice in the UK.

Here, we look at everything you need to know about Advanced Subscription Agreements. This includes what ASAs are, how they work, their advantages and disadvantages, rules, how to draft one and how they compare to alternative funding sources.

We’ll also reveal how Wise Business can help to streamline international investments for UK startups.

Get started with Wise Business ✍️

What are Advanced Subscription Agreements (ASAs)?

An Advanced Subscription Agreement (ASA) is a contract where an investor pays money to a company now in exchange for the right to receive shares later. This is often during the next priced equity round.

The investment is not a loan as there is no repayment or interest. Instead, the company receives the money immediately and when a trigger event happens later down the line shares are issued.

ASAs are a way to bring investment forward ahead of a formal fundraise, without needing to negotiate a valuation. They can also be structured to be SEIS/EIS-eligible, making them an attractive option for angel investors.

How do ASAs work?

ASAs can be customised to suit individual business and investor needs. But most follow a similar structure:

1. The investor pays in advance: Capital is committed upfront and the company receives it immediately. This money can then be used for product development, operations or to bridge the gap until a full funding round later.
2. A trigger event causes conversion: When a specific event occurs, ASAs convert into shares. The trigger event can include a qualifying funding round, a non-qualifying round, a sale or IPO or a longstop date.
3. The longstop date: This is the latest point at which the ASA must convert into shares if no other trigger event has happened. For SEIS/EIS purposes, the longstop date is usually no more than six months from the date of the agreement.¹
4. Pricing terms: ASAs commonly include incentives for early investors. For example, a discount on the share price at the next round or a valuation cap which sets the maximum valuation at which conversion can take place. A longstop valuation can also be included which is used only if conversion happens at the longstop date. This ultimately rewards investors for taking early risk.
5. Conversion into shares: When the trigger event occurs, ASAs convert into equity based on the previously agreed formula. If the company is SEIS/EIS-qualifying, shares will typically be ordinary shares.

Pros and cons of ASAs

Strengths of ASAs

Fast and simple

ASAs are a quick and simple way to negotiate compared to full equity rounds. They can also be used to avoid challenging conversations about valuation in the very early stages.

Not a loan

ASAs have no interest, no debt characteristics and there’s no repayment obligation. This keeps the company’s cash flow and balance sheet protected.

SEIS/EIS-friendly

If structured correctly, ASAs can qualify for SEIS/EIS tax relief. This can make them an attractive option for early-stage investors.

Founder flexibility

Founders can raise capital without needing to run a full round. This can help the business to level up ahead of larger raises.

Investors incentives

Discounts and valuation caps mean investors can benefit from favourable terms compared to later entrants.

Weaknesses of ASAs

Founder dilution

If the ASA includes a steep discount or low valuation cap, founders might be tempted to give away more equity than they expect.

Investor risk

ASAs are based on equity which comes with the risk of investors losing their money if the company fails before the conversion.

Legal complexities

Each investor may require their own ASA and if terms differ negotiations can become challenging.

SEIS/EIS restrictions

SEIS/EIS eligibility comes with strict rules. This includes no interest, no repayment rights, conversion within a reasonable time and ordinary shares only. Longstop dates typically must be within six months and there are non-compliance risks associated if investors lose tax relief.¹

Accounting considerations

Before conversion, the company may need to record funds as advance subscriptions. This can affect how accounts are presented.

SEIS/EIS rules for ASAs

For many early-stage UK startups, the ability to offer SEIS or EIS tax relief is essential. ASAs can be structured in a way to comply but they must meet specific criteria set by HMRC.¹

What are SEIS and EIS?

Short for Seed Enterprise Investment Scheme, SEIS is aimed at very early-stage companies. It offers investors 50% income tax relief, capital gains tax relief and loss relief.²

EIS, which is short for Enterprise Investment Scheme, is designed for slightly later-stage companies and offers 30% income tax relief, capital gains tax relief and loss relief.³

Both can be powerful incentives but only if the investment structure is compliant.

ASA requirements for SEIS/EIS eligibility

To make an ASA eligible, it typically must meet the following conditions:

1. No repayment: The investor must not be able to receive their money back. Conversion to shares is the only possible outcome.
2. No interest: The ASA must not include interest or any other debt-like returns.
3. Longstop date: HMRC typically requires the conversion to happen within six months of the ASA being signed.¹
4. Conversion: Shares must usually be ordinary, fully paid and non-redeemable.
5. Advance assurance: Most companies seek SEIS/EIS advance assurance from HMRC which gives investors confidence before signing an ASA.
6. Commercial risk: Any money received must support growth. It cannot be used to repay existing loans or be distributed to shareholders.
7. No investor control rights: Investors can’t receive preferential rights or significant control before the shares are issued.

When and only when all requirements are met, investors can claim SEIS/EIS relief once all shares are issued.

How to create an ASA

Creating an ASA is relatively straightforward, but there are several steps that must be followed:

1. Decide how much you need to raise: First, it’s important to determine whether ASAs are bridging the gap to a future round or funding immediate operational needs.
2. Choose or draft an ASA template: You can work with a legal counsel or use an established template online. Key terms to agree include the discount, valuation cap, trigger events, longstop date and conversion mechanism.
3. Consider SEIS/EIS requirements: If your raise involves SEIS/EIS investors, be sure to meet compliance requirements from the start.
4. Seek HMRC advance assurance: While optional, it is recommended that you do this to reassure investors that your round is likely to be tax-relief eligible.
5. Negotiate with investors: Here, you can discuss terms and conditions especially regarding dilution and exit scenarios.
6. Sign the contract and receive funds: Each investor must sign their own ASA. Funds then enter the company’s bank account and should be recorded properly.
7. When the trigger event occurs, convert: Whether it’s a qualifying round, non-qualifying round or longstop date, shares are issued in line with the ASA terms.
8. Issue shares: After conversion, issue share certificates, update records and help investors to claim SEIS/EIS relief if applicable.

ASAs vs CLAs vs SAFEs

ASAs aren’t the only early-stage funding tools. Convertible Loan Agreements (CLAs) and Simple Agreement for Future Equity (SAFEs) are also commonly used.

Below is a side-by-side comparison of all three:

Feature	ASA	Convertible Loan Agreement (CLA)	Simple Agreement for Future Equity (SAFE)
Repayment	No	Yes (loan)	No
Interest	No	Often yes	Usually no
SEIS/EIS compatible?	Yes (if structured properly)	Rarely	Often not in UK without modification
Valuation cap or discount	Common	Common	Common
Trigger events	Funding round, sale, longstop	Funding round, maturity	Funding round (varies)
Nature	Equity-like	Debt turning into equity	Equity-like
Speed/simplicity	Fast	More complex	Very fast (varies by jurisdiction)

While the right choice for you will depend on several personal factors and goals, if you want SEIS/EIS eligibility, ASAs can be a good option.

For debt protection, CLAs might be a better fit. And if you want a fast and simple way of raising funds, SAFEs can do this and are also often used in the US.

Other things to consider before using an ASA

As with any funding option or investment, it’s important to weigh up every aspect of it. For ASAs, this includes:

• Cap table modelling: It’s key to understand how multiple ASAs will dilute founders.
• Future investor expectations: Later investors may push back on overly generous caps or discounts.
• Governance: Decide what information rights ASA holders receive before conversion.
• Exit planning: Clarify what happens to ASAs on early exits.
• Accounting and tax: Ensure consistent accounting with your finance team. This is why it pays to have good communication with your accountant from the start.

How Wise Business can support ASA investors

While you’re exploring various funding options for your business, it’s also an ideal time to make sure you’re setting up the right business account.

Open a Wise Business account and you can hold and exchange 40+ currencies at once.

You can send fast, secure payments to 140+ countries, and get account details to get paid in 8+ currencies as if you were a local business (only with Wise Business Advanced).

Whenever you need to send, spend or exchange foreign currencies, you’ll benefit from the mid-market exchange rate, with low and transparent fees.

You’ll also benefit from all of these features:

• No ongoing fees, minimum balance requirements or foreign transaction fees
• Debit and expense cards for you and your team, which you can use in 150+ countries
• Multi-user access for team members, with ways to control and manage permissions
• Pay up to 1,000 people at once with the Wise batch payments feature
• Integrate with your favourite cloud accounting solutions
• Use the powerful Wise API for automation and streamlining workflow
• Take advantage of Wise Interest to make your funds work harder when you’re not using them (capital at risk).

With a truly global account, you’ll be all set to grow your business worldwide.

Register for Wise Business 💼

*Disclaimer: The UK Wise Business pricing structure is changing with effect from 26/11/2025 date. Receiving money, direct debits and getting paid features are not available with the Essential Plan which you can open for free. Pay a one-time set up fee of £50 to unlock Advanced features including account details to receive payments in 22+ currencies or 8+ currencies for non-swift payments. You’ll also get access to our invoice generating tool, payment links, QuickPay QR codes and the ability to set up direct debits all within one account. Please check our website for the latest pricing information.

---

Sources used:

1. SeedLegals - ASAs: A Guide
2. Wealth Club - SEIS Tax Relief
3. Crowd Cube - EIS Tax Relief

Sources last checked on date: 24-Nov-2025