A new corporation is created by the promoters, who are also involved in securing capitalization for the corporation through subscriptions. These reasons makes it necessary to draw up a Stock Subscription Agreement, Pre-Incorporation, which spells out the duties and compensation of the promoters. Though this Agreement is created before the incorporation of a corporation, it is not bound by the promotion Agreements, unless this Agreement is ratified and accepted by the corporation after its incorporation.
But, before drawing up Stock Subscription Agreement, it is essential to understand, what Stock Subscription is. This term means purchase of certain numbers of shares at stipulated price. Though, this provision is also incorporated in the Stock Sales Agreement after the incorporation. If there are no corporate bylaw restrictions or in the absence of statutory, any individual is entitled to purchase or subscribe to corporate stocks.
Share Subscription Agreement is created between the corporation and each shareholder, where this written document stipulates and regulates the transfer of the shares to the shareholders.
The basic content of Share Subscription Agreement includes:
Share Subscription Agreements are two types:
Non-restricted Share Subscription: It is a normal Share Subscription Agreement, where shareholders own the share straightaway, after paying for its value.
Restricted Share Subscription means the subscription of shares by the co-founders, where the agreement stipulates the vest of their shares over time.
Below given template of Stock Subscription Agreement, Pre-Incorporation, ill guide you, when you also draw up such agreements for Pre-Incorporation share allotments.
Pre-Incorporation Stock Subscription Agreement,
Stock Subscription Agreement, Pre-Incorporation___________, referred to as PROMOTER, and___________, referred to as SUBSCRIBER, agree:
PROMOTER shall organize a corporation to be preliminarily named____________, to be incorporated in the state of_________.
The planned initial stock offering shall be _____ shares, of ______ stock, with a par value of $______(_________ per share).
SUBSCRIBER agrees to purchase shares of___________ stock upon issuance. In the event that the offering is over subscribed, the SUBSCRIBER shall be entitled to a proportional purchase of shares.
The shares purchased are not registered with the United States Securities and Exchange Commission, nor the Securities Commission of any state.
The PURCHASER represents that it is qualified under the relevant rules and regulations of the United States Securities and Exchange Commission and the Securities Commission of any state, which may have jurisdiction to purchase these shares.
The PURCHASER further represents that it is not purchasing these shares with an intention of resale, nor will it take any actions that may result in it being considered an underwriter of the shares.
Prior to any transfer of these shares, the PURCHASER shall provide to the issuer of the stock a legal opinion, in a form acceptable to the counsel for the issuer, that the transfer will not result in the loss of the exemptions from registration of the securities then claimed by issuer.
The PURCHASER further represents that it has had adequate opportunity to obtain any information relevant to the decision to purchase, and has also had adequate opportunity to consult with advisors of their choice.
The PURCHASER agrees that prior to delivery of the stock to execute the shareholders agreement dated_____________.
Upon execution of this agreement, the SUBSCRIBER will pay to PROMOTER the sum of $(______________&___/100 dollars) which shall be used for an organizational fund for the expenses of pre-incorporation. The balance shall be due upon issuance of the shares.
Notices.
Any notice required by this Agreement or given in connection with it, shall be in writing and shall be given to the appropriate party by personal delivery or a recognized over night delivery service such as FedEx.
If to the Promoter_______________________________
If to the Subscriber:______________________________.
No Waiver.
The waiver or failure of either party to exercise in any respect any right provided in this agreement shall not be deemed a waiver of any other right or remedy to which the party may be entitled.
Entirety of Agreement.
The terms and conditions set forth herein constitute the entire agreement between the parties and supersede any communications or previous agreements with respect to the subject matter of this Agreement. There are no written or oral understandings directly or indirectly related to this Agreement that are not set forth herein. No change can be made to this Agreement other than in writing and signed by both parties.
Governing Law.
This Agreement shall be construed and enforced according to the laws of the State of____________ and any dispute under this Agreement must be brought in this venue and no other.
Headings in this Agreement
The headings in this Agreement are for convenience only, confirm no rights or obligations in either party, and do not alter any terms of this Agreement.
Severability.
If any term of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, then this Agreement, including all of the remaining terms, will remain in full force and effect as if such invalid or unenforceable term had never been included.
In Witness whereof, the parties have executed this Agreement as of the date first written above.
Dated____________________
PROMOTER:_______________
SUBSCRIBER:_______________