Subscription Agreement Private Equity

A subscription contract is an investor`s request to join a single limited partnership. It is also a bilateral guarantee between a company and a subscriber. The company agrees to sell a certain number of shares at a certain price and, in return, the participant promises to buy the shares at the predetermined price. In the past, it has not been possible to recruit investors in general to find investors who participate in the sale of shares by private companies. However, in 2013, the SEC lifted the ban on general demand. This means that you can advertise as you seek investors, such as online advertising via websites and social media. Note, however, that investors still need to be audited to ensure that they are accredited investors. Only certified and accredited investors can be accepted as investors for your business. When it comes to investing, there are certainly some good and some bad in the decision to do so with subscription contracts. While all the necessary legal information should be included in this agreement, try to keep it as simple as possible. You may mention, for example, that the investor read the private placement memorandum instead of repeating the information disclosed in the note.

This avoids potential confusion when the data is paraphrased. In many cases, a subscription contract accompanies the memorandum. Some agreements set a certain return paid to the investor, for example. B a certain percentage of the business surplus or lump sum payments. In addition, the agreement sets the payment dates for these returns. This structure gives priority to the investor, as he or she gets a return on the investment in front of the creators of companies or other minority owners. Private companies tend to use subscription contracts to raise capital from private investors. This can be done through the sale of shares or ownership of the company without having to register with the SEC. Companies that have a private placement memorandum may also want to include a subscription contract to attract potential investors.

Whether it`s a company that wants to invest in another company or a private investor, a subscription contract defines all transaction details, such as. B the agreed number and the share price. Private companies have obligations similar to those of state-owned enterprises when it comes to fully disclosing their finances, as well as other company information before the agreement is signed. Full disclosure is defined as the company that, in addition to other specific information about the ongoing projects it has implemented, must provide financial documents. These include business plans for the future. A private placement is a sale of shares to a limited number of accredited investors who meet certain criteria. A certain level of investment, asset and asset experience is one of the criteria for accredited status. As an alternative to the prospectus, investors receive a private placement memorandum.