I believe they are often called ASAs (Advance Subscription Agreements) in the UK.
Are there any fundamental differences in how they work in the UK and US?
Are there any fundamental differences in how they work in the UK and US?
Generally speaking, an Advanced Subscription Agreement (commonly known as an ASA and designed for use in the United Kingdom), is conceptually similar to a SAFE (originally designed for use within the United States).
However, there are a few fundamental differences to be aware of, though these may vary depending on how the ASA is drafted - here are a few notable ones:
However, there are a few fundamental differences to be aware of, though these may vary depending on how the ASA is drafted - here are a few notable ones:
- The ASA was designed to be eligible for certain tax advantages under the Enterprise Investment Scheme (EIS and the Seed Enterprise Investment Schemes (SEIS);
- The ASA has a "Long Stop" term, essentially a date before which a conversion event (as defined in the ASA) must happen - otherwise the ASA automatically converts to equity on a pre-agreed price (this is not a concept in standard SAFES);
- In order to qualify for the aforementioned tax advantages, it appears that the Long Stop date must be no later than 6 months after the issuance of the ASA;
- 6 months may not be sufficient time for a startup to reach a qualifying conversion event (i.e. a preferred equity financing) - so this is something to carefully consider.
*Please consult UK tax advice and/or counsel should you have questions about a specific set of circumstances.