You got SEIS / EIS Advance Assurance – Now What?
"SEIS" and "EIS" are very much buzzwords in the world of startups and funding right now. You may have already secured advance assurance from HMRC that your company qualifies under either or both schemes but then you start to wonder - what next...?
Here we share some practical pointers on what you as the Founder should consider as your next steps:
1. GET READY TO OFFER SHARES IN YOUR COMPANY TO INVESTORS
Understand your obligations to your investors. Take professional advice particularly in relation to your offer document and any shareholders agreement. It is fresh issues of shares only that qualify under SEIS & EIS. Also, remember your obligations extend for at least three years beyond the issue of the SEIS / EIS shares to your investors
2. DRAW UP A DETAILED SHARE CAPITAL TABLE (IN SPREADSHEET FORMAT)
No Founder can be without a detailed spreadsheet share cap table with each step mapped out from the Founder (subscriber) share issues and then for each round thereafter (SEIS, EIS and onwards). This allows the Founder to keep track of respective valuations, % shareholdings and to observe dilutions at each stage
3. SEIS FIRST, EIS AFTER (ALWAYS)
That order ONLY. So if you are planning on fundraising for both (and you have advance assurance for both) ensure that you allow at least ONE day to pass between the issue of the SEIS shares and the EIS shares thereafter
4. WATCH THE GROSS ASSETS LIMITS FOR SHARE SUBSCRIPTIONS
A ‘nice to have’ problem that many Founders would be envious of (!) but make sure that any share subscriptions from investors do not breach the ‘gross assets’ test at the time of the share issue. More likely to be a problem under SEIS with its lower £200k gross assets limit
5. DON’T LET ANY SEIS / EIS INVESTORS BREACH THE 30% LIMIT
This is where your nifty spreadsheet will come into play. Make sure that % shareholdings are shown and that no SEIS / EIS investors ever exceed 30%. Watch out for “associates” whose shareholdings will be aggregated e.g. spouses, parents, grand-parents, children, grand-children (brothers & sisters are okay)
We have a further 5 tips for Founders (so 10 in total) that we have pulled together into a handy one-pager PDF tip sheet. You can download it now via the link below