Key points
- The BSA-AIR is a contract under which a company issues a warrant giving an investor the right to subscribe for shares according to a price formula agreed in advance.
- Its main advantage is how quickly it can be put in place, which suits the pace of start-ups.
- Exercise of the warrant can be conditional on a specific event such as a new fundraising round or the sale of the company.
- Investors often benefit from preferential rights in capital increases and from anti-dilution (in French) clauses.
- The issuance procedure includes the initial agreement, the price calculation formula, the decision of the extraordinary general meeting and, when the warrants are exercised, the recording of the capital increase.
- The French Commercial Code governs the issuance of these warrants, which is reserved for joint-stock companies and authorised by the extraordinary general meeting.
What is a BSA-AIR? Definition, how it works and legal framework
The BSA-AIR, or Accord d’Investissement Rapide (rapid investment agreement), is a seed funding instrument for start-ups. The investor pays in funds immediately. In return, they receive a warrant giving the right to shares issued in a future funding round. The share price is calculated at that point, with a discount and a valuation cap. This tool is based on the regime for share subscription warrants in Articles L228-91 et seq. of the French Commercial Code (Code de commerce). Every situation is different and deserves an analysis dedicated to your project.
What is a BSA-AIR?
Definition
The BSA-AIR combines a share subscription warrant (bon de souscription d’actions, BSA) with a prior investment agreement. The investor contributes funds without the company setting its valuation immediately. The warrant gives them the right to subscribe for shares later, upon a triggering event. This event is most often a new fundraising round. The subscription price is then calculated according to a formula agreed at the outset. This mechanism postpones the negotiation on the company’s value to a time when that value becomes clearer.
The BSA-AIR meets a specific need at the seed stage. At an early stage, a start-up’s valuation remains difficult to establish. A long negotiation on this point delays access to funds. The BSA-AIR gets round this obstacle. It locks in the immediate injection of capital while deferring the setting of the price. It is therefore a flexible and fast pre-seed tool.
The discount and the valuation cap
Two parameters protect the BSA-AIR investor. The discount rewards their early risk-taking. It allows them to subscribe for shares at a price lower than that paid by the investors in the next round. The valuation cap, often simply called the cap, sets a maximum conversion value. If the company achieves a very high valuation in the next round, the investor converts on the basis of this cap, which is more favourable to them.
In principle, these two mechanisms apply together. The investor benefits from the more advantageous of the two calculations. The conversion formula must be drafted precisely in the initial agreement. An ambiguous formula leads to disputes at conversion. It can also harm existing shareholders. The quality of the drafting therefore determines the balance of the arrangement.
How does a BSA-AIR work?
The event triggering conversion
The warrant is exercised upon an event provided for in the contract. A new fundraising round is the most frequent trigger. Other events may be provided for, such as the sale of the company or a deadline set in advance. If no triggering event occurs within the agreed period, the contract provides for an exit mechanism or a conversion on predefined terms. These provisions avoid deadlock situations.
The rights attached to the BSA-AIR
Investors often negotiate additional rights. They may obtain preferential rights in future capital increases. They may also benefit from anti-dilution clauses, which protect their stake from erosion if shares are issued at a lower price. These rights are documented in the investment agreement. They must be consistent with the company’s articles of association and shareholders’ agreement.
The legal and tax framework
The legal basis of the BSA-AIR
The BSA-AIR has no stand-alone regime. It relies on the regime for securities giving access to capital. Articles L. 228-91 et seq. of the French Commercial Code govern the issuance of these warrants by joint-stock companies. The issuance falls within the remit of the extraordinary general meeting (Article L. 228-92). It entails the shareholders’ waiver of their preferential subscription right to the shares to which the warrants give entitlement (Article L. 225-132). This framework protects existing shareholders and makes the transaction legally sound.
The issuance procedure follows several steps. It includes the initial agreement between the company and the investor, the definition of the price calculation formula, the decision of the competent body and the publication formalities. Compliance with these formalities determines the validity of the issuance. Our team also assists with broader incentive transactions involving the share capital.
Accounting treatment and publication
Issuing BSA-AIRs calls for precise formalities. The issuance decision is recorded in the company’s registers. When the warrants are exercised, the capital increase is definitively completed by the mere fact of the exercise and the payments; the competent body then records the shares created and updates the articles of association, which are filed with the court registry (greffe) (Article L. 225-149). Until the warrant is exercised, the funds paid by the investor appear on the balance sheet according to their legal nature. The contractual documentation must faithfully reflect the parties’ agreement. Any discrepancy between the initial agreement, the resolution and the articles of association creates legal uncertainty. Careful follow-up of these steps determines the robustness of the arrangement.
Points to watch
Several risks justify legal assistance. A poorly anticipated valuation can harm the founders at conversion. An anti-dilution clause that is too favourable to the investor can weaken their stake. An imprecise conversion formula opens the way to litigation. Consistency between the BSA-AIR, the articles of association and the shareholders’ agreement must be checked. What happens to the warrants if the founders leave or if there is a change of control should be anticipated. Careful structuring protects both the company and the investor. We draft each clause according to your objectives and your timing constraints. Every situation is different.
Frequently asked questions
What is a BSA-AIR?
It is an Accord d’Investissement Rapide (rapid investment agreement). The investor contributes funds immediately and receives a warrant giving the right to shares issued in a future round, at a price calculated with a discount and a valuation cap.
Why use a BSA-AIR rather than a conventional funding round?
It avoids setting the valuation straight away, which is difficult to establish at the seed stage. It brings in funds quickly and postpones the price negotiation to the next round.
How is the share price calculated?
The price is determined upon the triggering event, according to a formula agreed at the outset. The discount and the valuation cap protect the investor, who in principle benefits from the more advantageous calculation.
What is the legal basis of the BSA-AIR?
The BSA-AIR relies on the regime for share subscription warrants, in Articles L228-91 et seq. of the French Commercial Code, which deal with securities giving access to capital.
Official sources
- Articles L228-91 et seq. of the French Commercial Code (securities giving access to capital, share subscription warrants) – Légifrance (in French)
- Article L. 228-91 of the French Commercial Code (issuance by joint-stock companies of securities giving access to capital) – Légifrance (in French)
This article sets out the state of the law for general information purposes. It does not constitute legal advice. Every situation is different and deserves a dedicated analysis. Content compliant with the professional conduct rules of the legal profession.
