The subscription contract is part of the private placement memorandum. Companies make these memos available to investors. It replaces a flyer. Subscription agreements are based on SEC 506 (b) and 506 (c) Regulation D. Among the provisions of these rules are: subscription is a form of sales contract that detaches itself from the traditional contract of buying and selling securities because it creates these securities by its execution. Apart from this essential differentiation, it is a normal purchase and sale contract. What information is usually contained in a subscription contract? A subscription contract exists between a company and a private investor to sell a certain number of shares at a certain price. This investor fills out a form that documents his ability to invest in the partnership. A subscription contract can also be used to sell shares in a private company. A subscription contract is an investor`s request to join a single limited partnership. It is also a bilateral guarantee between a company and a subscriber. The company agrees to sell a certain number of shares at a certain price and, in return, the participant promises to buy the shares at the predetermined price.
The shareholders` pact, also known as the shareholders` pact, aims to protect the minority or the majority of shareholders depending on the nature of the drafting. The aim of this document is to create the right balance between shareholders. The agreement generally describes in detail the rights and obligations of each shareholder and the legitimate pricing of the shares. Subscription contracts are the most common in startups and small businesses. They are used when entrepreneurs do not have the resources to cooperate with venture capitalists or to make the company public. As part of the private placement process, the new shareholder receives, after qualifying, a private placement brief. This memorandum contains a description of the investment and is usually accompanied by a share subscription contract. The board of directors of the issuing company checks each subscription to approve or refuse it. If the subscription is approved, the board of directors decides whether it should be executed in whole or in part, i.e.
how many shares will be sold to the investor in the subscription. Some agreements include some guaranteed return to investors. This may be a percentage of the company`s net income or a certain amount of lump sum to be paid on certain days.