As a startup business owner in Ontario, there are various legal documents you need to familiarize yourself with. One of these is the share subscription agreement. In this blog, we will discuss what a share subscription agreement is and why it’s important to have one for your startup.
A share subscription agreement is a legal contract between a company and an investor. It sets out the terms and conditions under which the investor agrees to purchase shares in the company. The agreement typically includes details such as the number of shares being purchased, the price per share, the payment terms, and the timeline for completion of the transaction.
Why is a share subscription agreement important for a startup?
- Clarifies the investment terms: The share subscription agreement lays out all the terms of the investment, including the valuation of the company, the percentage of ownership being sold, and the payment terms. Having a clear agreement helps to prevent misunderstandings or disputes between the investor and the company.
- Provides legal protection: The share subscription agreement provides legal protection for both the company and the investor. It sets out the rights and obligations of each party and outlines the consequences if either party fails to fulfill their obligations.
- Helps to secure future funding: Having a well-drafted share subscription agreement can help to establish trust with investors and make it easier for the company to secure future funding.
- Facilitates compliance with securities laws: In Ontario, companies issuing securities are subject to securities laws, and failure to comply can result in legal consequences. The share subscription agreement can help ensure that the company is compliant with these laws by setting out the required disclosures, representations, and warranties.
It’s important to work with an experienced startup lawyer to draft a share subscription agreement that meets the unique needs of your company. A lawyer can help you identify and address any legal issues, negotiate the terms of the agreement, and ensure that it is compliant with securities laws.
At Falcon Law PC, we have a team of experienced startup lawyers who can help you navigate the legal complexities of starting and growing your business. Contact us at 1-877-892-7778 or info@falconlawyers.ca to schedule a consultation today.
