Share subscription agreement
- Solicitor approved
- Plain English makes editing easy
- Guidance notes included
- Money back guarantee
About this share subscription agreement
This is a comprehensive agreement for a new shareholder - an individual or another company - to subscribe for new shares in a private limited company. The company may be in any industry and of any size.
The document assumes the subscriber pays in cash but holds back an agreed sum until after the next set of accounts. If the accounting profit is not as promised, then the final balancing payment is reduced.
This agreement provides the same protection to the subscriber as you would expect if the whole company were being bought outright. You have the benefit of 127 warranties (less what you decide to edit out). The penalty reduction of balance due by you is calculated by reference to a simple, flexible formula.
There is an option for one of the selling shareholders to be a trustee (as a trustee, he cannot give warranties).
The subscriber may also make a loan to the company, though this is covered in a separate document and merely referenced in this agreement.
This document enables you to decide how tough you want to be and who you want to bind. As drawn, the document binds all the shareholders to the warranties, but you could decide that only shareholder-directors should be at risk.
Simply put, a warranty is a promise that something is as it is described, and which, if untrue, can allow the side relying on that information to seek compensation.
This document differs from many other share subscription agreement templates in the number of warranties included.
Warranties are important for two reasons.
The first is that they protect the new subscriber, who does not have the same information as the directors and other shareholders about the state (and value) of the company.
The second is that they can improve the subscriber’s position. Because it is normal practice for subscribers to demand warranties, shareholders often give them without being sure about whether the situation is as warranted. New subscribers can take advantage by asking for more warranties than they might need, and later seeking compensation for those that turn out to be false.
We provide a very full set of warranties, in plain English so it is easy to choose whether you want each to be given or not. Existing shareholders will, obviously, want to limit the warranties given.
The law relating to this agreement
The framework of the deal is the Companies Act 1993. Within that framework, there are no special requirements as to what your deal should be.
This agreement is for a sale where new shares are issued - the buyer does not purchase the shares owned by someone else.
If there is no new issue and the buyer purchases the shares of an existing shareholder, a Share sale and purchase agreement is more suitable.
Sometimes, you may want to change relative ownership proportions at the same time as the sale by subscribing to newly issued shares. For example, you may buy the shares of a departing shareholder and then invest additional equity to obtain a majority shareholding. In that case, you will need a Share purchase and subscription agreement.
We also sell a simple share subscription agreement for uncomplicated transactions that don’t require the warranties that the other documents have.
You may also need other documents:
Contents of this share subscription agreement
- Definitions and interpretation: simple ways to avoid legalese and cover multiple situations of the same type
- Agreement for subscription
- Calculation of minimum profit
- Completion of the deal and delivery of documents
- Various legal provisions usual in a document of this type
- Warranties - select from 127, in neat, sensible categories for you to choose and use
This document was written by a solicitor for Net Lawman. It complies with current New Zealand law.
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