Why do ASAs have a six-month longstop date?
By SuLe · Updated 10 July 2026
ASAs carry a six-month longstop date because HMRC's published expectation is that an advance subscription agreement converts into shares within six months — any longer and your investors' SEIS or EIS relief is at risk. The longstop is the backstop: if no qualifying funding round has closed by that date, the ASA converts anyway, at a fallback valuation agreed on day one.
Key facts
- HMRC's published expectation is a longstop of no more than six months from the date of the ASA.
- Breaching HMRC's ASA conditions can cost investors relief worth 50% (SEIS) or 30% (EIS) of the amount invested.
- An ASA must not be capable of being varied, cancelled or assigned — so extending the longstop later is dangerous.
- If no qualifying round closes in time, the ASA converts at the fallback valuation on the longstop date; the money is never repaid.
- SEIS/EIS relief runs from the date shares are issued at conversion, not the date the investor paid.
What is a longstop date in an ASA?
The longstop date is the deadline written into an advance subscription agreement (ASA): if no qualifying funding round has happened by then, the ASA converts into shares at a fallback valuation fixed when the agreement was signed. Conversion is forced — the investor ends up with shares on that date no matter what.
The reason lies in the nature of the instrument. An ASA is an advance payment for shares — irrevocable, non-refundable and interest-free — so the investor can never simply ask for the money back. Without a hard conversion date, they could sit for years holding neither cash nor shares.
A "qualifying round" is usually defined as a round raising at least a stated minimum — commonly somewhere between £250,000 and £1m — so a token top-up cannot trigger conversion early.
Why does HMRC expect six months or less?
Because SEIS and EIS reward money genuinely at risk in shares, HMRC wants the gap between payment and share issue kept short. Its published expectation, set out in the advance assurance guidance, is that an ASA's longstop falls no more than six months after the date of the agreement.
The longer money sits unconverted, the less the arrangement looks like a genuine advance payment for shares — and the more it resembles open-ended funding on unstated terms. Debt-like funding can never qualify for SEIS or EIS.
The stakes are the reliefs themselves: 50% of the amount invested under SEIS and 30% under EIS. A drafting choice as small as "nine months instead of six" can put that entire claim in doubt.
What happens when the longstop date arrives?
If no qualifying round has closed, the ASA converts at the fallback valuation — sometimes called the floor or default valuation — agreed at signing. The company allots the shares, updates its registers and files form SH01 at Companies House within one month of allotment, as the Companies Act 2006 requires.
For investors, conversion is when the tax clock starts. SEIS or EIS relief arises when the shares are issued, so a longstop conversion in September means a September relief date even if the money arrived in March.
The fallback valuation deserves real attention. If your round slips, that number — not a negotiated market price — decides how much of the company your ASA holders receive.
Can we extend the longstop if the round is delayed?
Treat the longstop as fixed. One of HMRC's conditions is that the ASA must not be capable of being varied, cancelled or assigned — an agreement with a built-in extension right sits badly with that from day one, and a later handshake to "push the date back" invites the same analysis.
This is an area where the honest answer is "it depends, and the risk is real". If your investors do not care about SEIS or EIS, extending is a commercial matter between you; if they do, take advice before touching a signed ASA, because the cost of getting it wrong is their 50% or 30% relief.
The better protection is planning. Set the longstop only after mapping a realistic route to a qualifying round, and stress-test the fallback valuation for the scenario where the round never comes.
| Scenario | What happens to the ASA | SEIS/EIS position |
|---|---|---|
| Qualifying round closes within six months | Converts at the round price, less any discount | Relief runs from the round's share issue |
| No round by the longstop | Converts at the fallback valuation on that date | Relief can still be claimed if all ASA conditions were met |
| Longstop set beyond six months | Converts under its own terms, eventually | Outside HMRC's published expectation — relief at risk |
| Refund right or extension mechanism added | The advance payment starts to look like debt or a variable deal | ASA conditions failed — relief at risk |
Worked example
Amara and Josh, founders of a climate-tech hardware startup, sign a £120,000 ASA with three angels on 1 March: 15% discount, £1.5m fallback valuation, longstop on 1 September — exactly six months. Their seed round slips to November, so no qualifying round arrives in time.
On 1 September the ASA converts at the fallback valuation. With 1,200,000 shares in issue, that is £1.25 per share, so the angels receive 96,000 shares between them. The company files the SH01 by 1 October, and the angels' SEIS claims — worth up to £60,000 in total at the 50% rate — run from the September issue date, not from March when they paid.
Where founders go wrong
Agreeing a longer longstop to be "generous"
— nine or twelve months feels safer for a slipping round, and it quietly walks the ASA outside HMRC's expectation. Keep it at six months or less if relief matters.Assuming you can extend later
— the no-variation condition makes a signed ASA close to untouchable. Plan the timeline before signature instead.Treating the fallback valuation as boilerplate
— at the longstop it becomes the actual price. Run the dilution maths at that number before you sign.Forgetting the mechanics at longstop conversion
— the shares still need allotting, registers updating and an SH01 filing within one month, exactly as at a round.
Related questions
What happens if our funding round is delayed past the longstop?
The ASA converts anyway, at the fallback valuation written into the agreement — the investor receives shares, never a refund. That is deliberate: a refund right would make the ASA a loan and end SEIS/EIS eligibility. Model your dilution at the fallback price before signing, not after.
Can we just agree a longer longstop, like twelve months?
You can, but HMRC's published expectation for SEIS/EIS compatibility is six months or less, so a twelve-month longstop puts your investors' 50% or 30% relief in doubt. If no investor is claiming relief, the longstop becomes a purely commercial term you can set freely.
Does the six-month expectation apply to convertible loan notes too?
No. A convertible loan note is debt with its own maturity date, and debt can never qualify for SEIS or EIS in any event — so the six-month expectation, which exists to protect those reliefs, does no work for notes. [More: ASA vs convertible loan note — what's the difference?]
When does the investor's SEIS or EIS relief start?
When the shares are issued — at the qualifying round or on the longstop date — not when the money was paid. A shorter longstop therefore also shortens the investor's wait for relief, which is one reason six months suits investors as well as HMRC.
The longstop reads like boilerplate, but it is one of the few ASA terms HMRC has a stated view on — and one of the easiest ways to lose your angels their relief. A SuLe solicitor can sanity-check the longstop, fallback valuation and conversion mechanics before anyone signs. Book a free term sheet review and get the terms checked while they are still negotiable.
Keep reading: What is an advance subscription agreement (ASA)? · ASA vs SAFE — which should UK startups use? · ASA vs convertible loan note — what's the difference? · What is a SeedFAST and how does it compare to a standard ASA? · Do ASAs and convertible notes qualify for SEIS/EIS?
Primary sources: HMRC — advance assurance for venture capital schemes · HMRC — Seed Enterprise Investment Scheme · Companies Act 2006
