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Ash, Solicitor
Category: Law
Satisfied Customers: 10916
Experience:  Solicitor with 5+ years experience
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In Feb 2012 I made an investment in a limited company, on the

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In Feb 2012 I made an investment in a limited company, on the understanding that it and I was EIS-eligible. The investment agreement required the company to maintain their eligibility and that of their investors. The company failed to file appropriate paperwork and subsequently raised money under the SEIS scheme. Directors made verbal assurances that they would make good but never quantified it. They have since never volunteered a remedy, and any offers they have proposed (after prompting by me) would have left me substantially out of pocket. I have refused them all. Am I able to get legal protection and remedy to restore the value of my investment?

Alex Watts : Hello my name is XXXXX XXXXX I will help you with this. Please note that I am a working Solicitor and may be on and offline as I have to attend Court and meet with clients, even at weekends. As such you may not get an instant response when you reply, but rest assured I will be giving your question my immediate attention upon return You do not need to wait here as you will get an email when I reply.
Alex Watts : Do you have anything confirming in writing re EIS please?

Yes. The original Investment Agreement:



It is proposed that Richard, Karl and myself would invest in Glopho immediately to alleviate the current strained cash situation of the company. This is a stand-alone funding proposal, separate to the possible remuneration as supporters, possible employees and/or Directors of the company at some stage in the future.


The proposed structure is as follows:


  • · A total of £ 20,100 divided between Karl and Richard (£ 7,500 each) and Erik (£ 5,100).

  • · At a pre-money valuation of £ 300,000.

  • · Newly issued Ordinary shares ranking pari passu with existing shares.

  • · Given that there are currently 1,000 shares outstanding – it would mean a total of 67 shares at £ 300 per share – in order to avoid fractural shares it is proposed the following – 25 shares each to Karl and Richard and 17 shares to Erik).

  • · In the event the first external round of financing would be done with any type of preferential liquidation rights or other preferential treatment of any kind, the shares issued in this round would be converted into the same class of preferential shares or convertible loan shares at the holders’ preference on a 1 for 1 basis..

  • · The investors in this round will in good faith negotiate to adhere to any standard type of Shareholders Agreement (SHA) to be put in place at the first external round of financing. In the event no such funding or SHA is put in place before the end of 2012, the Investors, the company, you and all other investors shall in good faith agree to set up a proper SHA between themselves soonest possible thereafter.

  • · The new shares shall carry regular pre-emptive rights

  • · The Company shall do its outmost to ensure that the investors in this and subsequent rounds would be able to participate through the EIS investment scheme.


Neither Karl or Erik (the co-investors) were eligible for EIS as they are resident overseas. Erik was the Chairman at the time of investment. Emailed confirmation from all parties to accept this proposed agreement.

Alex Watts :

Are you saying they did less than their 'upmost'? On what basis was it refused please?


They failed to complete registration of the investment as an EIS investment (I think they would have been required to submit EIS 01, and receive back EIS 03 that I would have been given and presented to support my income tax rellief, CGT, IHT and Capital Loss write-off relief against this. Instead, with news beginning to emerge of the SEIS scheme, they decided to pursue their next round on those terms (which precluded any earlier VCT or EIS investment)

Alex Watts :

What loss have you suffered please?

Alex Watts :

How much?


I have not been able to claim Income Tax Relief (30% of the investment, £2,250). I will be liable for capital gains tax on any gain realised (which would otherwise have been free of capital gains tax, unlimited value), I would not be able to claim capital loss write-off if it fails (up to £2,100 value I think) and have lost the IHT relief (which on the grounds I am still alive doesn't amount to much yet)

Alex Watts :

You need to write and set out your losses and request a payment within 14 days or say you will go to Court within 14 days. You should make sure you send this recorded delivery and keep a copy.


If they do not payment you then you can issue proceedings in the County Court. You can either do this online at: or by completing form N1 and take it to your local County Court.


The Court will then issue a claim which a copy will be sent to the Defendant who will have a limited time to defend it, if not you can enter Judgment and enforce.


If the matter is defended it will be set down for a trial. If the claim is for £10,000 or less it will be a small claim and you will not need representation.


Can I clarify anything for you about this today please?


Can my request for payment include a request for additional equity as part of that (as that would be a fair way to offset the Capital Gains Tax liability)

Alex Watts :

Possibly, but keep it all under £10k.


Great, thanks

Alex Watts :

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