Simple Share Subscription

When a person wishes to purchase shares from a corporation, they “subscribe” for shares and the corporation will then “issue” shares to them. The documentation which is prepared as part of this type of transaction varies depending on the circumstances. With Groove Law, a simple share subscription is used where shares are issued to a person for a nominal amount of money, such as during the founding of a corporation.

In this situation, a directors' resolution is prepared to authorize the issuance of shares and the person purchasing shares signs a subscription and pays the purchase price (which is generally less than $100).

Even where shares are issued for a nominal amount of money, startups can only issue to certain categories of persons to ensure they qualify for the private issuer exemption (which provides for a more streamlined process when issuing shares). These categories include a director, officer, employee, founder or control person of the corporation; certain members of their family, their friends and business associates; and accredited investors (although in most cases a person purchasing as an accredited investor would be investing into the Corporation and this simple share issuance would not be used).

The most important considerations here are ensuring the proper number and class of shares are issued and that the person fits into one of the categories necessary for the corporation to qualify for the private issuer exemption.