If your startup finds capital, you`ll need a number of documents before the money hits your bank account. A share subscription agreement is a document you may need. While not all salary increases require this agreement, it`s important for founders to know when it`s necessary (and when not) to have one. As mentioned above, a share subscription contract is just one type of share offering document. If your investor has not applied for a share purchase agreement, it would not be in the company`s interest to offer it. An alternative is a share offer/share subscription letter. It is a shorter document that still sets out the main conditions and mechanisms of the investment, but does not contain guarantees from the company or the founder. Instead, the investor must perform their own due diligence. A stock offer/share subscription letter is often used in seed or Series A towers when you settle down from family and friends or fishing investors. It is less common in later cycles or when venture capitalists are involved.
If you`re moving out of a VC, you`ll likely insist on having a stock underwriting agreement containing detailed insurance and guarantees from the company and founders. However, you can consult a startup lawyer or help you with the development in order to reduce the potential negative effects of these provisions. A subcontract is a kind of share offering document. A share subscription contract (share subscription contract) is a promise by a potential shareholder, also called a subscription participant, to pay funds to a company (company) in an agreed number of “tranches”, in exchange for the issuance and allocation of a certain number of shares at a specified price, so that the subscriber becomes a shareholder (shareholder). A share subscription agreement must include the number of shares issued to the shareholder, as well as the order and date on which the funds are paid. Sometimes it would seem that a share subscription contract only specifies more fully and precisely the terms of a roadmap. A share subscription agreement is used to formalize the investor`s investment conditions in the company, commit the parties to the operation and define the investment process. However, the document may contain investor-friendly companies (and sometimes guarantees from creators).
Startups should then consider whether it is necessary to conclude one or whether a share subscription letter is sufficient. Share subscription agreements can vary considerably depending on the needs of the parties and the types of shares to be subscribed, but the usual clauses are as follows: once the parties have signed the share subscription contract, the investor and the company must follow the investment procedure set out in the document, namely: In Redweaver Investments Ltd v Lawrence Field Ltd (1991) 5 ACSR 438, The Nsw Supreme Court held, that a provision of a share subscription agreement which the defendant pays to the applicant, in certain circumstances, an “amount of compensation” “as lump sum damages” would essentially result in an unauthorized reduction in the defendant`s capital. Therefore, the alleged contractual obligation to pay the funds is not applicable. A share subscription contract defines and specifies the mechanisms of the investment: the document describes the parties to the operation, the description of the shares put up for sale, the purchase price (consideration), the guarantees and insurances of the parties, the requirements before and after completion, etc. . .