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If you’re running a company, issuing shares is a great way to grow your business.
But, when you’re issuing shares, it’s important that you have the agreement down in writing.
This is when a Share Subscription Letter comes in handy. It’s a central document that is given to an investor when you issue them new shares.
A Share Subscription Letter is a legally binding document that sets out the terms of the offer in a simple format. You can think of it as a short-form Share Subscription Agreement (we’ve written about these longer-form Share Subscription Agreements here).
Having a Share Subscription Letter captures the key points of your agreement in writing, which can solidify your deal and prevent misunderstandings down the track.
What Is Included In A Share Subscription Letter?
A Share Subscription Letter will include important details such as:
- The subscription price per share
- Date of settlement
- Amount of shares
- Confidentiality
- Tranches
- Warranty and indemnity
- Conditions precedent
It’s important to have a Share Subscription Letter in place to confirm the offer in writing as soon as possible.
How Do I Use A Share Subscription Letter?
Once the terms of the shares have been agreed upon, you can give the investor a Share Subscription Letter to formalise the offer.
Typically, a Shareholders Agreement will be signed together with a Share Subscription Letter or Agreement, such that the Investor will join the Shareholders Agreement of the company after the investment is complete.
When Do I Need A Share Subscription Letter?
A Share Subscription Letter is a really simple document, but it’s still legally binding!
It’s the most efficient option if you’re issuing shares and you don’t really need a long-form Share Subscription Agreement. In most cases, a long-form Share Subscription Agreement is only needed for more sophisticated investors that would like a full-scale contract with all the necessary protections.
But a Share Subscription Letter works just fine! This is especially the case if you’re bringing on board a number of investors and want to make this a smooth and easy process.
Need Help?
If you’re not sure whether a Share Subscription Letter is the right choice for your business, get in touch with our team for a free, no obligations chat. Feel free to contact us at [email protected].
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