You have decided to invest in a private company. The company has presented a promising business plan and its financial projections are sound according to advisors. You know who the managers are; you may even have met them. This is a project you want to be part of!
The only thing left to do is for the transaction between you, the investor or subscriber, and the company to be formalised. The company has already sent you a term sheet, a type of practice agreement, which you have read over and perhaps even modified. Having ironed out any misunderstandings or clarified potential issues, you are ready to sign the final contract to create the shares: the subscription agreement.
What is a subscription agreement?
The subscription agreement is a promise by the company to sell a certain number of shares at a certain price and a promise by the subscriber to buy the shares at that price.
Why do you need a subscription agreement?
The agreement may be relied on at a later stage to protect each party’s rights. For you, the subscriber, you are protected from the company changing the terms of the agreement. For the company, it is a guarantee that the subscriber will pay the fixed price.
What does the subscription agreement contain?
- Company and investment details: Name and ACN (if company)
- Investment amount for percentage equity or capital of the fully diluted capital of the company
- Agreement to subscribe
- Subscription price and number of issued shares
- Rights attached to subscription securities (redemption or liquidation preferences, voting preferences)
- Terms for termination before completion
- Nomination onto board
If you are looking for a subscription agreement, it can be drafted using a quick quote.
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