Creating a Stock Subscription Agreement

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

Creating a stock subscription agreement is an essential task for any investor or entrepreneur considering making an investment. This document serves as an agreement between the investor and the company they are investing in, outlining the rights and responsibilities of both parties in clear and legally-binding terms. With a stock subscription agreement, investors benefit from protection against potential issues that may arise during the course of the investment – such as disputes over money or restrictions on their rights as shareholders. Companies are also able to assert their interests, giving them peace of mind that their assets and resources will be appropriately respected by the investor.

The Genie AI team understand just how important it is for investors and entrepreneurs to have access to high quality legal documents at all times – which is why we’ve created a free template library filled with millions of data points teaching our AI exactly what a market-standard stock subscription agreement should look like. With this library, anyone can draft and customize legal documents quickly and easily – without paying a lawyer!

Drafting up your own stock subscription agreement doesn’t have to be a tedious process; our step-by-step guidance can help you create one tailored to your needs in no time at all. And best of all, you don’t even need to have a Genie AI account to use our templates! We believe everyone should have access to such important documents, so we’ve made ours freely available today - read on below for more information on how you can access them now.

Definitions (feel free to skip)

Securities and Exchange Commission (SEC): The SEC is a government agency in the United States that is responsible for protecting investors and regulating the securities markets.

Corporate charter: A corporate charter is a legal document that outlines the structure and purpose of a company and gives it the authority to conduct business.

Bylaws: Bylaws are a set of rules and regulations that a company must follow in order to operate and govern itself.

Regulatory approval: Regulatory approval is permission granted by a government agency or other regulatory body to proceed with a particular action.

Jurisdiction: Jurisdiction is the legal authority to hear and decide on a particular case or issue.

Contents

• Understanding the Basics of a Stock Subscription Agreement
• Gathering the Necessary Documents (e.g. financial statements, board resolutions, etc.)
• Obtaining any Required Regulatory Approvals
• Establishing the Terms of the Agreement
• Drafting the Agreement
• Executing the Agreement
• Ensuring the Agreement Adheres to Applicable Laws
• Registering the Agreement with the Appropriate Regulatory Authority
• Obtaining any Necessary Legal Advice
• Finalizing the Agreement
• Managing the Agreement (e.g. monitoring compliance, making any necessary updates, etc.)

Get started

Understanding the Basics of a Stock Subscription Agreement

• Understand the purpose and scope of a stock subscription agreement
• Research legal definitions and implications of the agreement
• Understand different types of subscription agreements, such as convertible debt and preferred stock
• Familiarize yourself with the most common clauses in a subscription agreement
• Learn about the regulatory requirements for subscription agreements

When you can check this off your list and move on to the next step:

• When you have a thorough understanding of the purpose and scope of the agreement and its implications, have researched the different types of subscription agreements, are familiar with the common clauses, and are aware of the regulatory requirements.

Gathering the Necessary Documents (e.g. financial statements, board resolutions, etc.)

• Identify the documents needed to create the stock subscription agreement
• Ensure the financial statements are up to date, accurate, and include all relevant information
• Get all the necessary board resolutions
• Make sure the documents are signed by authorized parties
• Check to see if any other documents are needed, such as shareholder consents, or a tax opinion
• Once all the documents have been gathered, proceed to the next step of obtaining any required regulatory approvals.

Obtaining any Required Regulatory Approvals

• Research applicable regulations, such as the SEC and other agencies, to determine what approvals are necessary to establish a stock subscription agreement.
• Contact the necessary regulatory agencies to submit the appropriate forms and documents.
• Wait for the agencies to approve the agreement.
• Once all necessary regulatory approvals are received, you can move on to the next step of establishing the terms of the agreement.

Establishing the Terms of the Agreement

• Research relevant laws and regulations that apply to the stock subscription agreement
• Outline the terms of the agreement, including the rights and obligations of the parties, the subscription price and the payment terms
• Consider any applicable tax implications
• Obtain legal advice if necessary
• Once you have finalized the terms of the agreement, you can move on to the next step of drafting the agreement.

Drafting the Agreement

• Research the applicable laws and regulations in the jurisdiction of the parties to the agreement
• Develop a document that outlines the terms of the agreement
• Ensure that the document includes all the essential components of a stock subscription agreement, such as the amount of capital to be raised, the type of securities to be issued, the rights and obligations of the parties, and the closing conditions
• Have the document reviewed by a legal professional to ensure that it is legally valid
• Finalize the agreement and have both parties sign it

When you can check this off your list and move on to the next step:

• When the document is thoroughly reviewed by a legal professional and all components of the agreement are included
• When both parties sign the agreement

Executing the Agreement

• Have both parties sign the agreement
• Ensure the document is properly notarized
• Obtain proof of delivery of the agreement to all parties
• Once all of these steps are completed, you can check this step off the list and move on to the next step of ensuring the agreement adheres to applicable laws.

Ensuring the Agreement Adheres to Applicable Laws

• Research applicable laws and regulations in the jurisdiction where the agreement will be enforced.
• Consult a lawyer to ensure that the language in the agreement is compliant with the laws and regulations.
• Make adjustments to the agreement if necessary.
• When you are confident that the agreement complies with applicable laws and regulations, you have completed this step.

Registering the Agreement with the Appropriate Regulatory Authority

• Determine the applicable regulatory authority responsible for the agreement
• Submit the agreement to the relevant regulatory authority
• Pay the applicable fees to register the agreement
• Follow any other steps necessary to register the agreement, as outlined by the applicable regulatory authority
• Receive confirmation that the agreement has been registered with the appropriate regulatory authority
• Check off this step and move on to the next step of obtaining any necessary legal advice.

Obtaining any Necessary Legal Advice

• Speak with a qualified lawyer who can provide advice based on the specifics of your business and stock subscription agreement
• Make sure to provide the lawyer with all the relevant information about the company and the agreement
• Ask the lawyer to review the agreement and provide recommendations for any necessary changes
• Once the lawyer has reviewed the agreement and provided their recommendations, make any necessary changes and obtain their approval
• Once you have the lawyer’s approval, you can check this step off your list and move on to the next step.

Finalizing the Agreement

• Have both parties sign the agreement and make sure each copies are kept on file
• Ensure that all parties understand the responsibilities and obligations of the agreement
• Make sure all parties are in agreement with the terms of the subscription agreement
• Make sure that the agreement complies with local laws and regulations
• Obtain any necessary legal advice to resolve any potential disputes
• Make any necessary revisions to the agreement if needed
• Ensure that all parties have a copy of the signed agreement
• When all of the above is complete, you can move on to the next step of managing the agreement.

Managing the Agreement (e.g. monitoring compliance, making any necessary updates, etc.)

• Monitor the agreement to ensure compliance with all relevant laws, regulations, and company policies
• Establish a process for regularly reviewing the agreement and making any necessary updates
• Monitor any changes in the industry or the company that may require updates to the agreement
• Keep a record of all updates and changes made to the agreement
• Check off this step when you have established a process for monitoring and updating the agreement.

FAQ:

Q: What is a Stock Subscription Agreement?

Asked by Elizabeth on April 8th 2022.
A: A Stock Subscription Agreement is a legally binding contract between a company and an investor that sets out the terms and conditions of a stock subscription, including the number and type of shares to be issued, the purchase price of the securities, the rights of the investor and other pertinent details. It is an important document for both parties to understand, as it outlines the legal obligations each party has to one another.

Q: What are the differences between US, UK and EU jurisdictions when it comes to Stock Subscription Agreements?

Asked by Jason on March 1st 2022.
A: The differences between US, UK and EU jurisdictions when it comes to Stock Subscription Agreements are largely based on the laws that govern securities transactions in those countries. In the US, securities are regulated by both state and federal laws, while in the UK and EU, securities regulation is handled at the national level. Generally speaking, US law tends to be more stringent than UK or EU laws when it comes to investments in stocks or shares. Additionally, each jurisdiction may have its own specific requirements for certain aspects of stock subscription agreements such as disclosure rules and anti-fraud regulations.

Q: What do I need to consider when creating a Stock Subscription Agreement?

Asked by Samantha on June 10th 2022.
A: When creating a Stock Subscription Agreement, there are several key considerations you should take into account. First and foremost, you should determine which jurisdiction’s laws will govern the agreement, as this will affect what terms are required in the agreement and how they must be drafted. Additionally, you should consider what type of securities will be issued (e.g., common stock or preferred stock), what rights will be granted to investors (e.g., voting rights or dividends), how much investors will pay for the securities, and what restrictions may apply to investors (e.g., transfer restrictions). Finally, you should consider any additional provisions that may be necessary for your particular situation such as anti-dilution or redemption provisions.

Q: Are there any specific requirements I should include in my Stock Subscription Agreement?

Asked by Christopher on August 15th 2022.
A: Yes, there are certain requirements that you should include in your Stock Subscription Agreement depending on which jurisdiction governs the agreement. Generally speaking, these requirements include disclosure rules regarding material information related to the investment; anti-fraud rules prohibiting certain activities; restrictions on transfers of securities; registration requirements for public offerings; and other applicable laws such as those related to insider trading or market manipulation. Additionally, depending on the type of securities being offered (e.g., common stock or preferred stock), there may be specific provisions that need to be included in the agreement such as voting rights or dividend rights for investors.

Q: What are some potential risks associated with creating a Stock Subscription Agreement?

Asked by Matthew on May 5th 2022.
A: There are several potential risks associated with creating a Stock Subscription Agreement that companies should be aware of before entering into an agreement with an investor. Some of these risks include potential liability if any of the representations made in the agreement turn out not to be true; potential liability if any proposed terms violate applicable laws; potential liability if any proposed terms conflict with other agreements or contracts; and potential liability if any proposed terms are not enforceable in court due to lack of consideration or lack of mutuality of obligations. Additionally, companies should also consider if they have sufficient expertise in securities law or if they need to hire outside counsel to assist them with drafting and negotiating a Stock Subscription Agreement that meets their needs and complies with applicable laws.

Q: How do I make sure my company is protected when entering into a Stock Subscription Agreement?

Asked by Jessica on July 20th 2022.
A: To ensure that your company is adequately protected when entering into a Stock Subscription Agreement it is important to ensure that all representations made within the agreement are accurate and complete; that all proposed terms comply with applicable laws; that all proposed terms do not conflict with other agreements or contracts; and that all proposed terms are enforceable in court due to consideration and mutuality of obligations being present. Additionally, companies should ensure they have sufficient expertise in securities law or hire outside counsel if necessary who can advise them through drafting and negotiating a Stock Subscription Agreement that meets their needs while also complying with applicable laws.

Example dispute

Possible Lawsuit Regarding Stock Subscription Agreement

• Plaintiff must show that the defendant violated the terms of the stock subscription agreement.
• Plaintiff must demonstrate that the defendant failed to fulfill their obligations as outlined in the agreement.
• Plaintiff may need to prove that the defendant’s actions caused them to suffer losses such as not receiving their expected dividends or suffering a loss of value in the stock.
• Plaintiff may need to demonstrate that the defendant was aware that their actions would cause the plaintiff’s losses.
• Plaintiff may seek damages for losses suffered, including lost dividends and a decrease in value of the stock.
• Plaintiff may seek to have the terms of the stock subscription agreement enforced.
• Settlement may be reached if the defendant agrees to pay the plaintiff for losses suffered.
• If damages are awarded, they may be calculated based on the losses suffered as a result of the defendant’s actions.

Templates available (free to use)

Preferred Stock Subscription Agreement
Stock Subscription Agreement

‍