Fund-raising information

Seeking Investment for a Company using the EIS

Generally companies seeking investment should consider various sources of capital, depending on the amount being sought. The suggestions below are not comprehensive but will act as guidance for those who have not sought EIS qualifying capital previously:

Less than £50,000: try friends, relations or your local accountants (who may know of somebody wishing to invest in a small company).
£50,000 to £250,000: contact local accountants and the British Business Angel Association
£250,000 to £750,000: contact one of the accountancy or legal members of the EISA
Over £750,000: contact one of the Sponsors or Promoters on the list of EISA members. Some sponsors may have a slightly higher minimum limit than this.

A further source of useful information in respect of seeking capital investment is the British Venture Capital Association on 020 7025 2950 or www.bvca.co.uk.

You will need a well thought out and clearly written business plan to attract an investor. This will take a major effort and will use up valuable management time. However, it is worth doing well. If you need to employ a third party to do this, make sure that such party has the necessary experience and track record to produce a document that will hold the attention of a sceptical investor (who may have seen several such plans before yours). Always ask for references or case studies before hiring your professionals.

The process for obtaining EIS advance assurance or formal clearance is by application to HMRC's Small Company Enterprise Centres and this should be done by a professional since clearance is granted against information provided. Should this be inadequate or circumstances change adversely, EIS relief could be withdrawn with unsatisfactory consequences for your shareholders. The process can take up to a month and is given on a provisional basis. After four months trading, you can then apply (using form EIS1 - www.hmrc.gov.uk/forms/eis1.pdf ) for the certificates which investors use to claim their tax relief (EIS 3s).

You should make it clear to any investor that an investment is likely to be in 'high risk'.

Advance Assurance gives investors comfort that the company is likely to qualify for EIS relief. This should be submitted to the Small Company Enterprise Centre (SCEC ) at CRI, TY Glas, Llanishen, Cardiff CF14 5ZG. on form AA1.

Warning EIS clearance whether in the form of Advance Assurance or formal, is granted on the basis of "information provided". You should provide HMRC will all relevant information in order to ensure the integrity of the clearance and must remember that the company needs to comply throughout the three year qualifying period.