This is a simple subscription agreement for new shares where the buyer does not need extensive warranties about the state of the company. He or she is likely to be very familiar already with the company, trust the existing shareholders, or be buying in at a price which lowers the risks significantly. This is therefore an ideal document for situations such as: additional equity investment by an existing shareholder, employee buy-ins, or bringing in a relative into a family business. The document is suitable for companies in any industry and for subscriptions of any size.
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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 framework of the deal is the Companies Act 2013. 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.
