Key points
- The BSA-AIR combines a share subscription warrant (bon de souscription d’actions, BSA) and a rapid investment agreement (accord d’investissement rapide, AIR), useful to start-up founders and investors alike.
- Inspired by the US Simple Agreement for Future Equity (SAFE), it is a contractual practice based on the statutory regime of share subscription warrants.
- Its main advantage is how easy it is to put in place, which is ideal for a start-up seeking fast funding.
- The investor provides funds immediately but only becomes a shareholder later, upon an event agreed in advance (often a fundraising round), at a discounted value.
- It provides funds with no repayment date and no interest, and it defers the shareholders’ dilution until the warrants are exercised.
- The subscription price of the warrant and the discount have tax consequences: a lawyer’s assistance helps you make them legally sound.
The BSA (share subscription warrant) – AIR (rapid investment agreement) system is of particular interest to start-up founders and investors alike. This easy-to-implement mechanism offers clear advantages. To put it in place under optimal conditions, the expertise of a business lawyer is necessary.
What is the start-up funding tool known as the BSA-AIR?
The share subscription warrant – rapid investment agreement is a contractual practice with no statutory regime of its own. This rapid investment agreement (AIR) is inspired by the US Simple Agreement for Future Equity (SAFE). The main advantage of this tool is how easy it is to put in place, which is ideal for start-ups that want fast funding. The BSA is a security giving deferred access to share capital, which only joint-stock companies (sociétés par actions) may issue (Article L. 228-91 of the French Commercial Code (Code de commerce) (in French)). Its issue is decided or authorised by the extraordinary general meeting (Article L. 228-92 of the Commercial Code (in French)). The warrant holder can subscribe for new shares in the company in order to become a shareholder. A start-up lawyer can help you put this solution in place, which is often favoured by simplified joint-stock companies (SAS).
What are the features of the BSA-AIR?
The share subscription warrant – rapid investment agreement is useful because it lets an investor enter a company’s share capital on a deferred basis. It can be launched quickly through a simplified process, as no valuation of the start-up is required. The investor brings a sum of money to the company and receives in return a share subscription warrant corresponding to the amount of that investment. In this way, the investor will be able to subscribe for shares in the company at a discounted value as soon as an event agreed in advance occurs. This is generally a new fundraising round. In practice, the investor provides funds immediately but only becomes a shareholder later, when the agreed event occurs. The subscription price of the warrant and the discount have tax consequences: it is advisable to be assisted by a lawyer to make them legally sound.
The advantages of funding your start-up through the BSA-AIR
For start-ups, the BSA-AIR is very attractive because of its simplicity and flexibility. It funds the company with no repayment date, and it defers the shareholders’ dilution until the warrants are exercised. Unlike a loan, it generates neither interest nor repayment on a fixed date. A start-up law firm such as Hashtag Avocats can answer your questions about this mechanism. This way, you will have everything you need to prepare your fundraising.
