EISA response to the Venture Capital Schemes Manual guidance on the proposed risk-to-capital

The Enterprise Investment Scheme Association (“EISA”) is pleased to have this opportunity to
comment on the Venture Capital Schemes Manual guidance on the proposed ‘risk-to-capital
condition’. This submission is being made by the Tax and Technical Committee of the EISA on behalf of its board and members.

As you are aware, EISA is an independent, not for profit, organisation, which exists to assist the flow of capital and resources to smaller, growing companies in the United Kingdom through the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS).

Our comments reflect representations from members of the Association. The EISA’s membership
represents a broad spectrum of interested parties: solicitors, accountants, EIS fund managers,
promoters, platform operators, financial intermediaries, independent financial advisers and other
entities and individuals closely involved in the operation of the EIS and SEIS.

The EISA supports the steps taken to remove opportunities for abuse of the rules and the intention
to ensure that EIS and SEIS investment represents capital at risk which supports and facilitates the
growth and development of entrepreneurial, UK smaller companies.

The EISA is supportive of the measures to support companies defined as knowledge intensive
companies (KICs) but would stress that there are many entrepreneurial, smaller businesses that
contribute to UK growth which would fall outside the definition of KICs. These companies also
develop new products and services, create opportunities for employment and contribute to
improvements in the rate of UK productivity growth. These companies are important to the
economic wellbeing of the UK and also face difficult challenges raising adequate start-up, seed and
growth capital because of the existence of the widely acknowledged equity gap.

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