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CustomersĪ company can indicate growth by showing an increase of its customer base. If a company can prove an increase in revenue over time it can show growth. Generic indicators of growth would include results such as: Revenue What are the generic indicators of growth? There is an explicit requirement that any money raised from EIS investments must be for the company’s organic growth and development. Provided that the EIS Advance Assurance has confirmed that the repayment of the loan to the individual is for the company’s organic growth and development, an investment by the individual several months later would not be connected to the original loan. Is a later investment connected to the original loan? If the loan was converted into ordinary shares, this would constitute a return of value and would not qualify for EIS relief. The individual was making a loan of £100,000 to the company. In order to claim EIS relief there must be a subscription of new funds.
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The trade was expected to be a qualifying trade for EIS purposes. The EIS shares would be issued within seven years of the first commercial sale of the business. Our client was a trading company providing branding and recruitment services. The repayment of the loan cannot be in pursuance of any arrangements for or in connection with the acquisition of shares. This means that the loan cannot be converted into shares. The loan will need to be repaid before and separately from the issue of further shares. The loan must have been repaid before the EIS investment is made. The company will need to show in the EIS Advance Assurance application that the repayment of this loan is part of an overall programme of growth and development. Our advice as to the conditions the lender investor needed to satisfy were: Condition 1 We established that if two conditions were met the lender could also be an EIS investor. Gannons advised on whether an individual who had previously made a loan to an EIS company could also qualify for EIS relief on his investment.