Shareholder Agreement Vs Subscription Agreement

The reference contract governs the terms of the investment itself, what happens in the investment context and what the founders give to new investors. On the other hand, the shareholders` pact defines the terms of the future partnership and is not directly related to the investment itself. The reference contract relates to the shareholder contract and is usually signed at the same time. As part of the private placement process, the new shareholder receives, after qualifying, a private placement brief. This memorandum contains a description of the investment and is usually accompanied by a share subscription contract. Running a business is the most important asset. In the absence of adequate capital, no business can be managed properly and to ensure the smooth running of all the operations that developers need to bring capital from time to time with available resources. To this end, the shares are issued to investors in exchange for the amount they invest. In general, the equity subscription contract is the first document that a company issues and plays a decisive role for each investor to invest in a business. This agreement allows an investor to know his control, his role, his returns on the investments he will get after the allocation of the shares.

This agreement should be developed in such a way that both the company and the investor benefit from reducing the investor`s risk and maintaining the company`s powers and roles after the investment. In accordance with Section 43 of the Companies Act 2013, there are two types of shares that a company issues to potential shareholders. The shares are the shares (as shown in point 43 (a) above) and the others are preferred shares (as shown in point 43 (b) above). Both actions have their own advantages and restrictions. In short, the former gives a shareholder the right to attend meetings and vote in any decision submitted to the company that we often refer to as voting rights, while the latter gives the shareholder the right to receive dividends from the company and not to obtain voting rights, except in some cases. Therefore, we can say that an equity subscription contract is a formal agreement that contains the investor`s investment terms in the business and binds the two parties in this investment process.