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Advance Subscription Agreement

Advance Subscription Agreement Template for India

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Key Requirements PROMPT example:

Advance Subscription Agreement

"I need an Advance Subscription Agreement for my AI software startup to receive USD 500,000 from a Singapore-based venture capital firm, with a valuation cap of USD 5 million and expected conversion by March 2025; must include FEMA compliance provisions and information rights for the investor."

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Document background
The Advance Subscription Agreement is commonly used in India's startup and growth company ecosystem as a bridge financing instrument. It allows companies to receive immediate funding while deferring complex valuation discussions and formal share issuance to a future date. This document type is particularly useful during fundraising rounds where the company's valuation is not yet determined or when there's a need to expedite the investment process. The agreement must comply with Indian corporate law, particularly the Companies Act, 2013, and may require additional considerations under FEMA regulations if foreign investors are involved. It typically includes detailed provisions for conversion mechanics, valuation caps or discounts, investor rights, and conditions precedent to share issuance.
Suggested Sections

1. Parties: Identification of the Company and the Investor(s)

2. Background: Context of the agreement, including company status and purpose of investment

3. Definitions: Key terms used throughout the agreement

4. Subscription and Payment Terms: Details of the advance amount, subscription price calculation, and payment mechanics

5. Conditions Precedent: Conditions that must be satisfied before share issuance

6. Conversion Mechanics: Process and timing for converting the advance into shares

7. Representations and Warranties: Statements of fact by both parties about their capacity and authority

8. Company Covenants: Ongoing obligations of the company until conversion

9. Investor Undertakings: Commitments and obligations of the investor

10. Events of Default: Circumstances constituting breach and consequences

11. Term and Termination: Duration of agreement and termination provisions

12. Confidentiality: Protection of sensitive information

13. Notices: Communication procedures between parties

14. Governing Law and Jurisdiction: Application of Indian law and dispute resolution

15. General Provisions: Standard boilerplate clauses including assignment, amendments, and severability

Optional Sections

1. Foreign Investment Compliance: Required when investor is non-resident, addressing FEMA compliance

2. Tag-Along Rights: Optional protection for investor in case of share sale by existing shareholders

3. Anti-Dilution Protection: Protection against future down rounds, if negotiated

4. Board Nomination Rights: If investor is granted right to nominate directors post-conversion

5. Information Rights: Special reporting rights for the investor

6. Most Favored Nation Clause: Protection ensuring investor gets best terms offered to future investors

7. Founder Obligations: If specific commitments from founders are required

Suggested Schedules

1. Schedule 1 - Subscription Details: Detailed breakdown of investment amount, valuation cap, discount rate

2. Schedule 2 - Company Information: Corporate details, capital structure, and shareholding pattern

3. Schedule 3 - Conditions Precedent: Detailed list of conditions to be satisfied before conversion

4. Schedule 4 - Company Warranties: Comprehensive list of company representations and warranties

5. Schedule 5 - Conversion Terms: Detailed mechanics and formulae for share conversion

6. Schedule 6 - Reserved Matters: List of actions requiring investor consent

7. Appendix A - Form of Share Certificate: Template for share certificates to be issued upon conversion

8. Appendix B - Compliance Certificates: Templates for various compliance certificates

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Advance Subscription Amount
Agreement
Applicable Law
Board
Business Day
Completion
Conditions Precedent
Conversion
Conversion Date
Conversion Price
Conversion Securities
Conversion Trigger Event
Discounted Price
Effective Date
Encumbrance
Event of Default
Existing Shareholders
Fair Market Value
Financial Year
Fully Diluted Share Capital
Government Authority
Independent Valuer
Investment Amount
Investor
Long Stop Date
Material Adverse Effect
Next Funding Round
Parties
Pre-money Valuation
Qualifying Financing
Reserved Matters
Securities
Shareholders' Agreement
Shares
Subscription Price
Subscription Securities
Subscription Shares
Valuation Cap
Warranties
Relevant Industries

Technology

E-commerce

Healthcare

Financial Services

Manufacturing

Renewable Energy

Education Technology

Software as a Service

Biotechnology

Consumer Services

Professional Services

Real Estate

Retail

Agriculture Technology

Clean Technology

Relevant Teams

Legal

Finance

Corporate Secretarial

Compliance

Investment

Corporate Development

Executive Leadership

Board of Directors

Business Development

Risk Management

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Company Secretary

General Counsel

Legal Director

Investment Manager

Venture Capital Associate

Corporate Lawyer

Investment Banker

Financial Controller

Compliance Officer

Managing Director

Board Director

Finance Director

Legal Counsel

Industries
Companies Act, 2013: Primary legislation governing company operations in India, including share capital, share issuance, and corporate compliance requirements
Securities Contracts (Regulation) Act, 1956: Regulates securities trading and establishes framework for dealing with securities in India
SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018: Governs the issuance of securities and necessary disclosures for public offerings and private placements
Indian Contract Act, 1872: Provides the basic framework for contract formation and enforcement, essential for the agreement's validity
Foreign Exchange Management Act, 1999: Relevant if the advance subscription involves foreign investors, regulating foreign investment in Indian companies
Indian Stamp Act, 1899: Determines the stamp duty payable on the agreement and its enforceability
Income Tax Act, 1961: Relevant for tax implications of advance subscriptions and share issuance
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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