Private companies that want to raise money can sell shares to specific organizations and individuals without having to first register with the U.S. Securities and Exchange Commission. A common example is venture capital financing, in which a company sells shares to venture capitalists, in exchange for capital that allows the company to start or grow. Prior to the conclusion of the sale of shares, both parties sign a legally binding sales contract, referred to as a company subscription or a company share agreement. In addition to being a kind of sales contract, a subscription contract can also help the company qualify potential subscribers. SEC rules state that only companies and individuals who qualify as accredited investors have the right to purchase shares from a private company. If the company violates this regime, it loses its private enterprise exemption and must register with the SEC. Regulation D of the Code of Federal Regulations defines the companies, organizations and individuals who qualify as accredited investors with whom a private company may enter into a business underwriting contract. This is how subscription agreements work on StartEngine: a share subscription agreement is used to formalize the investor`s investment conditions in the company, commit the parties to the agreement and define the investment process. However, the document may contain investor-friendly companies (and sometimes guarantees from creators). Startups should then consider whether it is necessary to conclude one or whether a share subscription letter is sufficient. In addition, a share subscription agreement contains insurance and guarantees from companies (and sometimes founders).
These guarantees are in the interest of the investor – they essentially help him to know what he got into without having to carry out a great deal of due diligence himself. Warranties may contain statements that indicate that: A corporate subscription agreement works in the same way as a standard purchase agreement. On the one hand, it is a promise from a private company to sell a certain number of shares at a certain price to a private investor, also known as a subscriber. On the other hand, it is a promise that makes a subscriber buy shares at the agreed price. While the agreement exists between private parties, each share sold makes the subscriber an associate of the company like a traditional investor. You can view your signed subscription agreement by logging into your StartEngine account. Click on your name in the top right corner and select “View Invest”. You should see the option to view your signed subscriptions in addition to all the investments for which they are available! Unless otherwise provided, this Subscription Agreement is binding on the parties and their heirs, executors, administrators, successors, legal representatives and authorized beneficiaries of the assignment and are deemed to be entered into by such heirs, executors of wills and are bound by such parties, the insurances, warranties, agreements and acknowledgements contained therein. Directors, successors, legal representatives and authorized beneficiaries of the assignment. If you are wondering what the difference is between the share purchase agreement and the share sale agreement, you may own a business or consider starting a business that would require one of these agreements. If you understand the differences between these two types of agreements, you can make sure that you are using the right version to meet your business requirements.