Share Subscription Letters and Agreements
When a company issues shares to a person, it is common practice to confirm the number of shares and the costs at which they will be purchased in writing. If a deal is relatively simple and not subject to extended negotiations or long documents (such as a shareholder and subscription agreement - often referred to as an SSA) a simple ‘share subscription letter’ or ‘share subscription agreement’ will usually be sufficient. See examples of both below.
Share subscription letters are usually very short and will come from the person buying the shares (the “Subscriber”). The letter will outline the number and class of shares they are applying for and the price per share. It will also state how they will be paying for them. The letter authorises the company to enter the Subscriber’s name into the register of members and requests that they be sent a share certificate. Since only the Subscriber signs this document, the company is not legally bound by the letter but if they fail to issue the shares they must return the funds to the Subscriber.
Alternatively, a simple share subscription agreement may be used. This document contains slightly more information and will be signed by both the Subscriber and the company issuing the shares. The subscription agreement includes the same information as the subscription letter, but will often also include additional information such as the company’s bank details. Where relevant, it may include a paragraph stating that the company will comply with the requirements to allow the Subscriber to benefit from EIS.
This agreement creates a contract between the two parties, and the obligations within it are therefore legally binding.
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