subscription-agreement

Subscription Agreement

2 signers
1Company
2Subscriber
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Download this Subscription Agreement Template

A subscription agreement is key to attracting high-quality investors who can invest in stocks offered by a business. However, a poorly written subscription agreement can lead to legal lapses that will cost you far more money. Therefore, you need to make sure the deal is executed in an effective manner.
An example of a subscription agreement for purchasing shares

Startups and smaller companies often have subscription agreements. Business owners use them when they can’t afford to go public but want to attract venture capital investments.

The share subscriber agreement sets forth the conditions on which a private investor can purchase the shares.

A person may become a stockholder in several ways. A means to do this can include a shareholder agreeing to purchase shares from the firm at a certain subscription price. This arrangement is usually further formalized using terms sheets.

This subscription agreement template from Fill includes all the necessary provisions required for a successful and legally binding transaction. It also outlines the rights and obligations of both company and the subscriber, including the number of shares, payment terms, and representations and warranties.

By downloading this template, you can save time drafting your own subscription agreement from scratch and ensure that it covers all important aspects of the transaction. Additionally, you can easily customize the template to fit your specific needs. Download now to secure our sample subscription agreement.

Subscription Agreements: How They Work and What's Included

Subscription agreements can vary by company size, needs, sector, and many more. This downloadable contract provided by Fill is a commonly used stock subscription agreement where a private entity agrees to buy stocks from the company at a set subscription price based on share units.

While subscription agreements work for most companies, they are not compulsory. Nevertheless, this document can be beneficial for anyone who agrees to buy a share of an organization in clear terms.

This document can also be useful for taxation purposes. Often subscription agreements are relatively brief or sometimes contain limited detail, without the need to register with the US Securities and Exchange Commission, such as when a company sells stocks to raise capital from venture capital entities. In some cases, however, more formal subscriber agreements are used.

Understanding the contents of a subscription agreement

While this document can be customized to become legally binding, it’s still best to get legal advice when drafting a subscription agreement. When you combine investment experience and legal experience, you can create powerful contracts protecting the legal rights of the business and the subscriber. It may be helpful to protect your investments and prepare the agreement, as well as foresee any potential disputes.

When designing a subscription agreement, don’t forget to include the following:

  • A clear identification of the parties involved in the agreement
  • The number of shares the subscriber promises to purchase
  • The subscription price
  • The terms of payment and any discounts for early payment
  • Any representations and warranties provided by the company
  • Conditions for the completion of the sale
  • Confidentiality or intellectual property clauses

Private placements

A private placement or subscription agreement guarantees your company will sell stock at a specified quantity at an agreed price. The above data may not be included on a private company placement note if no exemption is granted under a prospectus.

Conditions and precedents

Certain subscription contracts may have certain terms to fulfill for subscription finalization. Most are generally favorable for investors. An investor, for example, can invest in a company only when certain conditions have been met.

Common mistakes

The resulting agreement is too complicated. You may include a mention that the investment manager has not read any private placement documents. It also helps avoid ambiguity if the information is quoted or copied. Because of the nature of this document, having legal assistance can prove very useful. A lawyer will explain to you the legalities of this contract and make sure you are in agreement with what has been outlined.

Signatures

This is the final section of the subscription agreement where both parties are required to sign the document to make it legally binding.

FAQ About Subscription Agreements

An investment contract with an incorporated limited partnership is referred to as a subscriber contract. The company sold the shares in a pre-determined way to the investors, who recorded the purchase at agreed prices.
Often called “subscription agreements,” the purchase agreement represents the main agreement between an issuer and an investor in private placements of securities of debt or equity.

Share subscription agreements are basically a contract for acquiring shares by companies. By contrast, shareholders agreements provide rules for the long-term relationship between shareholders.

A subscription agreement must be negotiated along with an investment agreement, where the subscriber acknowledges their role as an investor in the company, while a shareholder agreement covers the relationship between existing shareholders.

Limited liability company (LLC) subscription agreements represent an applicant to form a limited partnership with a corporation or LLC. The aforementioned two-way guarantee is provided for new shareholders or subscribers.
Subscriber agreements are legal contracts allowing a shareholder to acquire shares in a business in a limited partnership. The agreement outlines the terms and conditions of the purchase. It becomes a legally binding document once all parties sign it.

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