An agreement between a corporation and investors to sell the investors shares at a set price is known as a share subscription agreement. The simplest way to accomplish this is by giving new shares to investors, who then become business shareholders after the transaction is completed. A corporation can raise money by issuing shares that can be bought through a private placement or public offering. The share subscription agreement is signed at the end of the due diligence process while forming a company. At times, the shareholders agreement and share subscription agreement together are known as Investment Agreement.
The quantity of shares the company agrees to issue to the shareholder, as well as the sequence and date of the payment, must typically be specified in a share subscription agreement. Depending on the requirements of each company, a share subscription agreement can vary widely, but some common clauses are confidentiality, fulfillment of a precondition, tranches, and guarantee and indemnity.
A share purchase agreement is an agreement made between two parties. Here, the seller agrees to sell the buyer the specified number of shares for a particular price. The document’s primary goal is to demonstrate that the terms and conditions of the agreement were reached through mutual agreement. Such a contract details the consideration, the necessary number of shares to be sold, the prerequisite criteria, and the covenants between the parties. After the parties sign it in accordance with this agreement, the shares will be allocated.
The agreement contains General details of the company and of the purchaser and seller such as name, address, date of the agreement, number of stocks to be purchased, rate of purchase, etc. The agreement shall also include pre and post execution conditions which must be satisfied for the enforcement of the agreement. It is possible to sign a share purchase agreement in a variety of circumstances, most notably in the context of mergers and acquisitions. One is when a buyer purchases stock in a corporation, they become a co-owner of the business. The other way is when the buyer obtains a majority stake in the company by purchasing a sufficient number of shares of the company.
Share purchase agreement is at times also referred to as the Share Transfer Agreement. The agreements both deal with the same subject matter, the only difference being that Share Purchase Agreement might be revoked after signing, but the Share Transfer Agreement, puts the name of the buyer in the official list of shareholders of the company thus making the shareholder liable for his unpaid share capital.