Share Subscription Agreement

Updated for 2014

A share subscription agreement sets out the terms and conditions upon which a party will subscribe for new shares in the capital of a company.

This agreement contains details of the parties involved, the new shares that the subscriber will subscribe for (i.e. purchase), the price to be paid for the subscription shares, when and how completion of the share subscription will take place, what will need to happen on completion, what legal assurances (warranties) the subscriber will get from the company and/or its principal shareholders in relation to the financial and business affairs of the company, and so on.

Further details are set out below.

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In the agreement, provision is made to allow for the inclusion (if the subscriber requires) of the key shareholders of the target company as party to the agreement for the purpose of having them provide warranties to the subscriber in addition to having the company provide such warranties. The benefits of doing so are set out in the accompanying notes to the agreement.

The main subscription clause provides for the subscription (i.e. the purchase) by the subscriber (i.e. the proposed purchaser) for the subscription shares (i.e. the new shares to be issued by the company) at the subscription price (i.e. the purchase price for those new shares). This subscription shall take place on the date that the parties sign and date the subscription agreement provided that the subscriber has delivered the subscription monies to the company. Once the monies are delivered, the company is obliged to allot and issue the subscription shares to the subscriber and to issue a share certificate to the subscriber in respect of the subscription shares he has purchased.

In connection with the issue of shares to the subscriber, the company and (where required by the buyer) the key shareholders (together the “warrantors”) will give certain warranties (legal assurances) to the subscriber in relation to both the company’s ability to issue the subscription shares to the subscriber free from encumbrances and pre-emption rights and the company itself. If the warranties are incorrect in any way and, as a result, it materialises that the shares acquired by the subscriber are in fact worth less than the amount he paid for the shares, the subscriber will be able to take a legal claim against the warrantors for breaching the warranties. This claim is called a warranty claim.

While this share subscription agreement contains a number of standard warranties that a subscriber for shares might expect to see in an agreement of this kind, every company is different and, depending on the nature of its business, you may want to get specific warranties in relation to specific matters.

For example, if you are subscribing for shares in an IT company, you should be primarily focused on getting warranties in relation to its IT operations as opposed to warranties in relation to the company’s environmental impact. By contrast, if you are investing in a company that operates petrol stations, you will be more interested in environmental issues rather than IT issues.

If you require any additional warranties, you should refer to the long form warranties which are contained on this website. These long form warranties contain a variety of different warranties suitable for most any business.

The share subscription agreement also includes standard boiler plate clauses such as in relation to confidentiality, notice requirements, governing laws, etc.

Detailed instructions on each of the clauses in this share subscription agreement and on completing the share subscription agreement are contained in the notes that accompany the agreement.





Note

This share subscription agreement enables a person to subscribe for new shares in the capital of a private limited company. It does not however contain any elements of a shareholders’ agreement. If you wish to include elements of a shareholders’ agreement, the combined share subscription and shareholders’ agreement available on this website could perhaps be more suitable for you.

Clauses Included in this Share Subscription Agreement:

- Definition and Interpretation Clause

- Subscription for Shares Clause

- Completion Clause

- Warranties Clause

- Notices Clause

- Confidentiality Clause

- Costs Clause

- Assignment Clause

- Amendments Clause

- Waiver Clause

- Severability Clause

- Counterparts Clause

- Entire Agreement Clause

- Governing Law and Jurisdiction Clause

- Schedule 1 - Details of the Key Shareholders and the Subscriber

- Schedule 2 - Details of the Target Company

- Schedule 3 – Warranties

- Schedule 4 – Business Plan

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