Shares subscription agreement: simple transaction
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- Plain English makes editing easy
- Guidance notes included
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About this shares subscription agreement
This short agreement is for a new shareholder to subscribe for new shares to create a minority or majority holding in a private company in any industry.
It is intended for smaller and uncomplicated transactions: for the introduction of a family member into a company, a senior employee or director buy-in, the appointment of a new non-executive board member who is incentivised by a small shareholding, or for an existing shareholder to invest additional equity.
It differs from our standard share subscription agreement by having no warranties, so the subscriber is likely to be familiar with the company already, or trust the existing shareholders, or be buying in at a discount.
The subscription is for cash, with payments in two stages. The final price to be paid is dependent on the profit of the company in the next set of accounts. If the profit is not as promised, the subscriber can deduct an amount from the final payment. The penalty reduction of balance is calculated by reference to a simple, flexible formula.
You may also make a loan to the company, though this is covered in a separate document and merely referenced here.
The law relating to this agreement
The framework of the deal is the Business Corporations Act . Within that framework, there are no special requirements as to what your deal should be.
This agreement is for the situation 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.
If you require warranties, see our standard share subscription agreement.
You may also need other documents:
Contents of this shares 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
This document was written by a solicitor for Net Lawman. It complies with current Canadian law.
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