色花堂

A share subscription agreement is a contract between a company and an investor under which the company agrees to allot new shares to the investor in exchange for a subscription payment. Unlike a share sale agreement (which involves existing shares), a subscription creates new shares and increases the company's share capital. It is commonly used in start-up and growth equity rounds.

Directors must have authority to allot shares under section 551 of the Companies Act 2006, granted either in the articles or by ordinary shareholder resolution. Pre-emption rights under section 561, which give existing shareholders first refusal on new shares, must be disapplied by a special resolution (75% majority) before shares can be issued to new outside investors. A private company's articles can disapply pre-emption rights permanently.

Standard company warranties cover: good title to the new shares; the shares will be fully paid on allotment; the information in any investment memorandum is accurate; no material adverse change has occurred; the company is in good standing and has complied with its filing obligations at Companies House; and the company holds all required licences and permits. These warranties give the investor grounds for a claim if they prove false.

Where the company has obtained HMRC advance assurance for EIS or SEIS, the agreement should include representations by the company that it meets and will maintain the qualifying conditions. EIS provides 30% income tax relief and capital gains exemption on disposal after three years. SEIS provides 50% income tax relief for investments up to 200,000 pounds per year in very early-stage companies.

Common anti-dilution provisions include pre-emption rights on future share issuances, weighted-average or full-ratchet price protection on down rounds, and tag-along rights allowing investors to sell alongside founders in a sale. These provisions are typically agreed in a separate shareholders' agreement entered into simultaneously with the subscription agreement.

Institutional and significant investors commonly receive: monthly or quarterly management accounts; audited annual accounts within a set number of days of the financial year end; notice of board meetings and the right to appoint an observer; and notification of material events. These rights are more often recorded in a shareholders' agreement than in the subscription agreement itself.

No. Stamp duty is not chargeable on the allotment of new shares for cash consideration. It applies only to transfers of existing shares. This is one reason why investors prefer subscription structures over secondary purchases in early-stage deals, and it also means no stamping formalities are required before the investor is registered in the company's register of members.

If the parties have agreed conditions precedent (such as shareholder approval or regulatory clearance), and those conditions are not satisfied by the agreed long-stop date, either party may typically terminate the agreement. Neither party owes the other compensation for a termination caused solely by a failure of a condition, unless the agreement expressly provides for a break fee or the failing party was in breach of a best-efforts obligation.