What Is The Meaning Of Share Subscription Agreement

It is an exchange of promises between a potential shareholder called an underwriter and a company. A share subscription contract provides that the company undertakes to sell a certain number of shares at a certain time and at a certain price in order for the subscriber to become a shareholder. In return, the subscriber undertakes to buy the shares at a certain time and at a certain price. Share subscription contracts are common in limited partnerships where the general partner manages the entire partnership. To become a partner, you must meet the standard requirements of the action sizing agreement. As mentioned above, a share subscription contract is just one type of share offering document. If your investor has not applied for a share subscription agreement, it would not be in the company`s interest to offer it. An alternative is a letter of offer of shares / subscription of shares. It is a shorter document that still sets out the main conditions and mechanisms of the investment, but does not contain any guarantees from the company or founder.

Instead, the investor must perform their own due diligence. A letter of offer to purchase shares/subscription is often used in seed or Series A rounds when they are raised from family and friends or angel investors. This is less common in subsequent rounds or when venture capitalists are involved. If you get up from a VC, they will likely insist on having a stock purchase agreement that includes detailed insurance and guarantees from the company and founders. However, you can seek advice from a start-up lawyer or provide development assistance to reduce the potential negative effects of these provisions. Also known as a shareholders` agreement, the shareholders` agreement is intended to protect the minority or majority of shareholders, depending on the type of wording. The purpose of this document is to create a fair relationship between shareholders. The agreement generally describes in detail the rights and obligations of each shareholder and the legitimate price of the shares.

In addition, a share subscription agreement contains corporate (and sometimes founder) representations and warranties. These guarantees are to the investor`s advantage – they essentially help them know what they were getting into without having to do a thorough due diligence themselves. Guarantees may include statements that: Instead of a prospectus, an investor participating in a private placement would receive a memorandum from the private placement […].

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