A Subscription Agreement is the formal contract that turns the “intent to invest” into a legal reality. While the questionnaire (from my previous response) verifies who they are, this document dictates the terms of the sale.
Below is a simplified template for a private corporation selling common stock to a friend or family member.
COMMON STOCK SUBSCRIPTION AGREEMENT
1. SUBSCRIPTION
The undersigned (the “Subscriber”) hereby agrees to purchase __________ shares of Common Stock of [Your Corporation Name] (the “Company”) at a price of $__________ per share, for a total investment of $__________.
2. PAYMENT
The Subscriber shall deliver the total investment amount to the Company via [Wire Transfer / Check] upon execution of this Agreement. The Company shall issue a Stock Certificate representing the shares within [30] days of receipt of funds.
3. REPRESENTATIONS BY SUBSCRIBER
The Subscriber acknowledges and agrees to the following:
- Speculative Risk: I understand that this investment involves a high degree of risk and I may lose my entire investment.
- Access to Information: I have had the opportunity to ask questions of the Company’s management and have received all information I deem necessary to make an informed decision.
- Investment Intent: I am purchasing these shares for my own account for investment purposes only and not with the intent to resell or distribute them.
- Transfer Restrictions: I understand these shares are “restricted securities” under the Securities Act of 1933 and cannot be sold or transferred without registration or a valid legal exemption.
4. COMPANY DISCRETION
The Company has the right, in its sole discretion, to accept or reject this subscription in whole or in part. This agreement is not binding until signed by an authorized officer of the Company.
5. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of the State of [e.g., Wyoming].
SIGNATURE SECTION
SUBSCRIBER: Signature: ___________________________
Print Name: __________________________
Date: ________________________________
ACCEPTED BY THE COMPANY: Signature: ___________________________
Title: _______________________________
Date: ________________________________
Important Post-Signature Steps
- Issue the Certificate: Once the money is in the company bank account, issue a physical or digital stock certificate. It should include a “Restrictive Legend” on the back (a small paragraph stating the shares aren’t registered with the SEC).
- Update the Cap Table: Record the new shareholder in your company’s internal ledger (the “Capitalization Table”).
- File Form D: Even for friends and family, you usually must file Form D with the SEC via their EDGAR system within 15 days of the sale. This is a “notice filing” that tells the government you are using a legal exemption.
- Board Consent: Before signing, ensure your Board of Directors has passed a “unanimous written consent” or a resolution authorizing the issuance of these specific shares.
Would you like me to draft the “Board Resolution” text you need to approve this stock sale?