If you’re running a company, issuing shares is a great way to grow your business.

But, when you’re issuing shares, it’s important that you have the agreement down in writing.

This is when a Share Subscription Letter comes in handy. It’s a central document that is given to an investor when you issue them new shares.

A Share Subscription Letter is a legally binding document that sets out the terms of the offer in a simple format. You can think of it as a short-form Share Subscription Agreement (we’ve written about these longer-form Share Subscription Agreements here)

Having a Share Subscription Letter captures the key points of your agreement in writing, which can solidify your deal and prevent misunderstandings down the track.

What Is Included In A Share Subscription Letter?

A Share Subscription Letter will include important details such as:

  • The subscription price per share
  • Date of settlement
  • Amount of shares
  • Confidentiality
  • Tranches
  • Warranty and indemnity 
  • Conditions precedent

It’s important to have a Share Subscription Letter in place to confirm the offer in writing as soon as possible.  

How Do I Use A Share Subscription Letter?

Once the terms of the shares have been agreed upon, you can give the investor a Share Subscription Letter to formalise the offer. 

Typically, a Shareholders Agreement (or Accession Deed) will be signed together with a Share Subscription Letter or Agreement, such that the Investor will join the Shareholders Agreement of the company after the investment is complete.

When Do I Need A Share Subscription Letter?

A Share Subscription Letter is a really simple document, but it’s still legally binding! 

It’s the most efficient option if you’re issuing shares and you don’t really need a long-form Share Subscription Agreement. In most cases, a long-form Share Subscription Agreement is only needed for more sophisticated investors that would like a full-scale contract with all the necessary protections.

But a Share Subscription Letter works just fine! This is especially the case if you’re bringing on board a number of investors and want to make this a smooth and easy process.

Need Help?

If you’re not sure whether a Share Subscription Letter is the right choice for your business, get in touch with our team for a free, no obligations chat. Feel free to contact us at team@sprintlaw.com.au or on 1800 730 617.

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