A subscription agreement is a legally binding contract between a company and an investor, sometimes called a subscriber. This legal document outlines the terms and conditions that govern the purchase of company shares and ownership interests or securities in the company.
Subscription agreements are commonly used in private placements, venture capital, and startup funding rounds to formalize investment transactions. This contract helps ensure that all parties are following securities laws and regulations.
It is crucial to carefully review a subscription agreement before agreeing to the terms of the transaction. A comprehensive contract review will involve the following steps:
While it is possible to review your own subscription agreement, many investors and companies choose to hire lawyers to assist in the transaction. A lawyer can check the contract for mistakes and ensure that it follows all applicable securities laws in your jurisdiction.
When reviewing a subscription agreement, you should look for the following key components:
Subscription agreements can be complicated and depending on the needs of the parties, the agreement may require additional clauses. It is always a good idea to speak with a lawyer familiar with securities law when determining what terms and conditions need to be included in your subscription agreement.
Meet some lawyers on our platformYes, a subscription agreement is legally binding. Once all parties sign the contract, they agree to be held to the terms within the agreement. This means that each party will be responsible for upholding their end of the deal which can include payment obligations, ownership rights, and obeying any agreed upon restrictions laid out in the contract.
When a contract is legally binding, that means that if either party breaches the contract, the nonbreaching party can be held legally responsible for any damage sustained because of the breach. For this reason, it is important that each party fully understands their rights and obligations prior to executing the agreement.
Whether or not you can get out of a subscription agreement depends on the terms and conditions outlined in the agreement. Some common ways that parties can terminate a subscription agreement include:
Terminating a subscription agreement without cause and without proper procedure can have legal consequences and could result in penalties or even a lawsuit. Always consult with a knowledgeable attorney before taking any action to terminate a subscription agreement.
A subscription agreement is typically signed by the two parties entering the agreement: the “issuer” and the “subscriber”.
The issuer is the entity, often a company, offering the securities for sale. When the issuer signs the subscription agreement, it confirms its willingness to issue and sell the securities to the subscriber.
The subscriber is an investor who is purchasing the securities. By signing the contract, the investor agrees to buy the specified number of shares or ownership interests outlined in the agreement.
Yes. It is always advisable to hire an attorney to review your subscription agreement. Subscription agreements often facilitate complex financial transactions, so it is important that the contract is well drafted and free from mistakes.
Hiring a lawyer to conduct contract review provides the following benefits:
While hiring an attorney for subscription agreement review may incur costs upfront, it is a valuable investment. When a lawyer reviews your subscription agreement, it can provide peace of mind, legal protection, and a clearer understanding of the investment's terms and conditions.
Do you need help with a subscription agreement review? If so, post a project in ContractsCounsel's marketplace to receive bids from lawyers who are licensed to practice law in your state and can handle your project. All lawyers on the ContractsCounsel's platform are vetted by our team to make sure you are provided with top-tier service.
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
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Christopher M. Lapinig is an experienced attorney, admitted to practice in California and New York, with extensive experience in civil litigation at the trial and appellate levels in various areas of the law, including, but not limited to, constitutional law, labor and employment, and consumer protection. He also has experience in immigration law and with administrative wage-and-hour claims. Chris currently works in impact litigation, and he also teaches legal writing at the University of Southern California. Chris also has significant experience in journalism and lay writing; his work has been published in The New York Times, The Atlantic, CNN, and other prominent media outlets. Born and raised in Queens, New York, Chris previously served as a Deputy Attorney General in the Consumer Protection Section at the California Department of Justice. He also served as a Skadden Fellow and Staff Attorney in the Impact Litigation Unit at Asian Americans Advancing Justice – Los Angeles, where his work focused on providing holistic and culturally sensitive legal services to victims and survivors of human trafficking in the Filipino community. At Advancing Justice-LA, Chris also litigated voting rights and immigrant rights cases. At the beginning of his legal career, Chris served as a law clerk to the Honorable Denny Chin of United States Court of Appeals for the Second Circuit and was the first Filipino American Clerk for the Honorable Lorna G. Schofield of United States District Court for the Southern District of New York, the first federal Article III judge of Filipino descent in United States history. Chris was also a Fulbright Research Scholar in the Philippines. A Phi Beta Kappa member, Chris graduated summa cum laude from Yale College and earned a B.A. with Distinction in Linguistics and with Distinction in Ethnicity, Race and Migration. In college, Chris served as President of Kasama: The Filipino Club at Yale, Moderator of the Asian American Students Alliance, and Head Coordinator of the Asian American Cultural Center. Chris returned to Yale for law school and received his J.D. in 2013. In law school, Chris served as the Co-Chair of the Asian Pacific American Law Students Association, the Co-Coordinator of the Critical Race Theory Conference, the inaugural Diversity Editor of the Yale Law Journal, and the Founding Coordinator of the Alliance for Diversity. He was a member of the Worker and Immigrant Rights’ Advocacy Clinic.
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