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In addition to the specific requirements set out for the shares, the Company and the investor, there are also General Requirements that must be satisfied…
The EIS General Requirements can be summarised as follows:
Funds raised must be employed for qualifying business activity
The funds raised under EIS must be:
The funds must be employed or used for the relevant business activity within a limited period of time.
That period of time is later of:
It should be noted that there are cases where the Court has considered the failure to use funds within the required time limit including Christopher Richard Skye Inns Ltd  and Benson Partnership Ltd .
|Annual limit on relevant investment||Lifetime limit||What is a relevant investment?|
|• £10m for Knowledge Intensive Companies
• Max £5m
• in a 12 month rolling period (Ie not a calendar year, tax year, or accounting period)
|• £20m for Knowledge Intensive Companies
• Otherwise, £12m
|• VCT investment
• EIS / seed EIS investment
• Social Investment Tax Relief
• Any state aid approved investment
• Don’t forget investments made in subs
This is a relatively recent change (Budget 2017) and it effectively imposes a long stop date at which the Company can raise its first venture capital finances. This includes EIS and Seed EIS.
The time limits are as follows:
|Type of Company||Time limit||
Time measured from
|General||7 years||First commercial sale|
|Knowledge Intensive Companies||10 years||When annual turnover first exceeds £200k|
It should be noted that some exceptions exist.
Clearly, it might make for an attractive investment if the Directors of the investee company are able to set out that a white knight will ride in after three years and purchase the shares from the investor.
However, any such formal arrangements are prohibited.
Further, there must be no ‘Underpinning of value’. For example, schemes could not insure investors from making a loss, or build in mechanisms to maintain the value of the shares artificially.
Other provisions preventing any other monkey business include the requirement that there are ‘no disqualifying arrangements’. This is widely drawn and includes any arrangements entered into:
This is widely drawn.
Albeit, we can’t give you investment advice as we are not regulated by the Financial Conduct Authority – so please get that type of advice from someone who is!