A share subscription agreement, also known as a stock subscription agreement is a written agreement used whenever someone (Subscriber) wants to purchase new shares (sometimes called stock) from a corporation and become a shareholder (sometimes known as a stockholder).
What are Shares?
Shares represent units of ownership in a company amongst a corporation’s shareholders. There are several different types of shares including: voting, non-voting, common, and preferred shares. Voting shareholders are eligible to vote on decisions at shareholders’ meetings, such as electing a board of directors to manage the corporation, whereas non-voting shareholders do not have this eligibility.
Common and preferred shares refer to the priority in which shareholders receive profit distributions (dividends). Share Subscription Agreements usually involve the purchase of common class shares as opposed to preferred shares. Note that most corporations have common shares, but not all corporations have preferred shares. Preferred shareholders have priority when receiving dividends and in the event a corporation closes and converts its assets into money.
Do I Need a Share Subscription Agreement?
Share Subscription Agreements are used by corporations when preparing to sell new shares and by individuals who want to purchase new shares of a corporation. Share Subscription Agreements record all of the shareholders in the corporation, how many shares are owned by each shareholder, and how many shares are available to be issued. Share Subscription Agreements typically include the name and address of the person or company buying the shares, the name and address of the corporation selling the shares, and details about the shares being sold such as the number of shares being sold, the class of shares being sold, and the price for which the shares were sold. If more than one type of share is being sold, such as Voting and Non-Voting Shares, a separate Share Subscription should be used to document each type.