Subscription and Shareholders’ Agreement

A subscription & shareholders’ agreement (“SSA”) may be used as an alternative to a shareholders’ agreement. The main difference is that an SSA also includes the terms of an investment, in addition to the terms that govern the relationship between shareholders, typically found in a shareholders’ agreement.

SSAs can be used in both simple and complex investments as an alternative to separate subscription agreements and shareholders’ agreements.

The British Private Equity & Venture Capital Association (“BVCA”) provides model documents, including an SSA which can be found here. This document is significantly more robust than the short form shareholders’ agreement which can be found here as it is designed for a Series A investment round. The BVCA also provides a useful drafting note that accompanies their SSA which explains the provisions of the agreement. The drafting note can be found here.

Even if your company is not yet at this point, this SSA provides useful examples of various clauses that you may wish to use in a shorter agreement, such as shareholder information rights and investor warranties, which are statements of facts you’re required to disclose against if not fully accurate.

It also includes provisions for investor consent rights, which are certain matters that specific shareholders/investors (or directors appointed by those specific shareholder/investors if applicable) must consent to in addition to any shareholder resolutions. This consent can be given by using an investor consent letter (an example can be found here, or you can select “must sign” shareholders on the Vestd platform, which means a shareholder resolution will not pass without their consent.

The BVCA model SSA also provides a useful structure of how the subscription can be incorporated into the agreement, and offers the option of including clauses for a split completion (where one part of the investment completes, with another part completing at a future date).