Subscription Agreement (Issue Shares to Investor)

A subscription agreement is used to issue shares to investors and other persons who are purchasing shares. Where shares are issued for nominal money, such as to founders and early shareholders, Groove Law uses a simple share subscription.

A subscription agreement is mainly used to protect the corporation through representations and warranties which are essentially statements where the investor confirms items such as that they are aware of the risk and have made an independent decision to invest, that they are not relying on any representation other than those in the agreement and that the investment will comply with applicable securities and other laws.

The subscription agreement will generally also set out any additional documents that have to be signed by the investor, such as a shareholders agreement and, depending on which securities exemption the investor is relying upon, additional certificates and forms. For instance, in transactions Groove Law typically deals with, the investor generally relies on exemptions for:

• an accredited investor on the basis that they have met certain financial tests; or
• a close friend, business associate or family member of a director, officer, founder or control person.