A subscription agreement targets private investors, angel investors, and institutional investors, all called “subscribers.” A subscription agreement details the agreement between a subscriber and the South Carolina business entity in which he or she wants to invest in. The subscription agreement establishes the promise by a company to sell a certain amount of the company’s shares, membership units (or interest), or partnership interest, at a certain price. The agreement also represents the investor’s promise to buy that specific amount of equity established by the agreement.
A subscription agreement is used to cement the details of an agreement to sell equity in a company. These type of agreements are ordinarily used in private companies, start-ups looking to raise capital from investors by selling their ownership or equity in the company, and individuals/entrepreneurs looking to induce investors with the protection of a private placement memorandum and want to include a subscription agreement to put the proposed deal in writing.
Individuals, private investors, and companies use subscription agreements to draw out the details of a given business transaction, such as the price and agreed upon amount of shares. An investor benefits from this agreement because it allows him or her protect against the company changing the terms of a deal. A company owner benefits from a subscription agreement by locking down the terms of the sale and the amount of equity to be sold without fear that the investor will change his or her mind. It takes a promise to sell and buy into a real transaction.