Free due diligence checklist for EII scheme investors

Hi folks,

Investing in private companies for Employment Investment Incentive (EII) relief can be rewarding, but is high risk. Not only does the company need to deliver a return on your investment, it also needs to meet complex qualifying criteria and strict conditions on the use of your investment. If they get it wrong, the relief can be clawed back. Worse case you lose both your capital and your tax relief.

The onus is on you, the investor, to do your diligence on the company and the investment. But the legislation around EII is too complex for an ordinary retail investor to be expected to do anything other than cursory due diligence on the company. Even accounting professionals tend to refer EII work to tax specialists.

Inspired by this query, I decided to create the attached checklist that you can ask private companies to complete and return to you as part of your due diligence exercise. The purpose of this is to reduce the risk of your investment being disqualified for EII relief. It is intended to supplement, not replace, the commercial due diligence you would conduct anyway.

Each question is important and in most cases directly ties back to the EII legislation. If their answers don't align with the guidelines provided, then these are red flags and you may want to dig deeper.

The EII scheme is hugely important for Ireland's economic development, and can be a great addition to a balanced portfolio. I hope this helps anyone looking to invest in private EII schemes. I don't claim any copyright so feel free to use as you see fit and even make improvements and repost.

Philbert.

Disclaimer: I'm not a financial or tax professional. I have both invested in EII schemes and delivered a return to EII investors through my company. The checklist is provided for informational purposes only and is not a substitute for professional advice.
Disclosure: My company is running an EII scheme this year and you can PM for details if interested.