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EIS: under the bonnet
About the EIS Association
The EIS Association (EISA) is the official trade body for the Enterprise Investment
Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) industry. EISA is a
highly effective not-for-profit organisation that exists to aid the provision of capital
to UK small and medium-sized enterprises (SMEs) through these two schemes.
EISA works closely with HM Treasury, HM Revenue and Customs, government
ministers, MPs and the FCA to enhance EISs and SEISs and promote the benefits
of using them to investors, companies and their respective advisers.
EISA collaborates with other trade bodies that support investment into SMEs,
including the British Venture Capital Association (BVCA), the Association of
Investment Companies (AIC), the Institute of Chartered Accountants in England
and Wales (ICAEW) and the UK Business Angels Association (UKBAA). The EISA
Director General sits on the BVCA Venture Capital Working Group, which aims to
present a unified voice from all sections of the SME and venture finance industries
to the UK government and the EU.
EISA’s membership is drawn from all areas of the EIS/SEIS industry and includes
EIS/SEIS fund managers, lawyers, accountants, tax advisers, corporate financiers,
IFAs and wealth managers throughout the UK. Details of our members and
membership categories can be found on our website, www.eisa.org.uk, under
the ‘Membership’ section.
Please contact Mary Rodgers at [email protected] if you are interested
in learning more about EISA and becoming a member.
2
About this guide
The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) support the UK economy
by encouraging the flow of private capital from taxpaying individuals to some of the country’s brightest companies
– those that show the most promise and the highest growth potential. These companies use investors’ money
to help finance expansion and development at a time when the impact of growth can be most positively felt. In
exchange for providing capital, investors are granted a series of generous tax reliefs by the UK government, helping
them to mitigate the risks and enhance the returns that can be generated from investing in growing companies.
The main purpose of this guide is to get ‘under the bonnet’ of EIS and SEIS. Our aim is to delve a little more
into the detail of these schemes, look at the component parts that make them tick and illustrate how they work
in practice.
EIS and SEIS investing is becoming more and more popular. The investor demographic is broadening to encompass
a wider range of people, some of whom may be less familiar with this exciting, vital and rewarding area of UK
equity investing. This is why we have produced this guide. We want to help educate investors and their advisers
about EIS and SEIS and what to expect from investing in this sector. Along with the sponsors of this guide (see
page 18), we hope to provide interesting and practical insights into investing in UK companies through EIS and
SEIS and to raise awareness of these schemes so that even more investors can benefit from them.
Mark Brownridge
Director General
The Enterprise Investment Scheme Association (EISA)
In this guide
What is the difference between EIS and SEIS?
4
How do I invest in EIS?
5
How do investment managers source EIS-qualifying investments?
6
Supporting an investee company to aid its success
7
What if a company needs more investment before it can be made ready for exit?
8
OK, I’ve decided I’d like to invest. What happens now?
9
Staying on top of your investments
12
Planning a route to exit
13
What happens after an exit?
15
Questions to ask your EIS manager
17
This guide’s sponsors
18
3
What is the difference between EIS and SEIS?
EIS and SEIS are very similar in many respects, but there are some important differences.
EIS and SEIS serve the same essential purpose – to be a conduit for early-stage investment into
high-growth-potential, smaller and younger UK companies, for which there is widely regarded to be
a ‘finance gap’, meaning many promising businesses can struggle to obtain growth funding.
The key difference between the two is that SEIS is explicitly targeted at start-ups and very earlystage companies, while EIS can be used by larger and more mature companies – though these are
still relatively small and young in the context of the UK’s business and corporate landscape.
SEIS funding
criteria for
companies:
Fewer than 25
employees
Trading for less than
two years
Gross assets valued
at no more than
£200,000
No previous investment
from a Venture Capital
Trust or EIS
Subject to a lifetime SEIS
funding limit of £150,000
The comparable
requirements for
EIS:
Fewer than 250
employees
Trading for less than
seven years (or less
than 10 years for
‘knowledge-intensive’
companies – typically
those with high research