Subscription and shareholders’ agreement—single investor meaning

Parties Who are the parties involved? In particular, specify: the investor(s) the managers the investee company (newco) Conditions Are there any conditions to completing the investment? What are each party’s obligations to meet those conditions, and by what deadline? Share subscription What will the investee company’s capital structure be? Which class and how many shares will each shareholder (the investor, the managers and any other shareholders) subscribe for? Warranties Who will give the warranties? Is it limited to the managers? Will they be provided jointly, jointly and severally, or on a several basis? How wide will the warranties be? It is usual for investment agreement warranties to centre on the business plan and the managers, as the acquisition agreement generally affords the investor sufficient protection regarding the company. What restrictions will apply to warranty claims? These may include: periods within which claims must be notified caps on each warrantor’s liability and on...

Parties Who are the parties involved? In particular, specify: the investor(s) the founders the investee company Conditions Are there any pre-conditions to finalising the investment? What must each party do to meet those conditions, and by what deadline? Share subscription What is the investee’s capital structure? Which class and how many shares will each shareholder (the investor, the founders and any other shareholders) take up? Warranties Who will give the warranties—only the founders, or both the company and the founders? Will they be provided jointly, jointly and severally, or severally? How wide-ranging should the warranties be, and are there priority areas to cover? What limits will govern warranty claims, including: the period within which claims can be brought caps on each warrantor’s liability and on aggregate liability de minimis for individual claims and an aggregate threshold Board of directors How many directors will sit on the board?...

Subscription and shareholders’ agreement This Practice Note offers guidance for drafters preparing and/or reviewing a subscription and shareholders’ agreement relating to the allotment of shares (and, potentially, loan notes) in a private limited company incorporated in England and Wales by a private equity (or venture capital) fund investor (the investor) within a venture capital (VC) deal, where the structure provides for split exchange and completion, ie conditions must be met before completion of the subscription and shareholders’ agreement. The investment contemplated is into an existing company (the Company), with the current shareholders (typically the business’s founders) keeping the shares they have already been issued in the Company. Set out below are matters to weigh up when drafting and/or reviewing the principal provisions of a subscription and shareholders’ agreement (SSA). Parties The investee company Although the principal parties to the SSA will be the relevant investor and the Company’s founders, the Company will ordinarily be included as a party too, ie the vehicle in which the investor...

Business angels A business angel, sometimes called an angel investor, is a wealthy individual who backs young, fast-growing private ventures with minimal or no trading record, acting solo or within a collective such as a network or syndicate. Angels bridge the equity funding gap that sits between start-up and seed money (often provided by founders and ‘family and friends’) and institutional venture capital. Angels can act independently or join networks and syndicates when making investments collectively too. This form of backing targets early-stage, high-growth opportunities where operating histories are limited. Companies seeking angel finance generally require between £10,000 and £500,000 (and at times considerably more), yet conventional funding is frequently unavailable. Banks typically insist on significant assets as security, and venture capital houses, though targeting high-growth firms, deploy larger sums in third or later rounds. For more detail on investment types and investor categories in a private equity setting, consult Practice Note: Private equity investment—firms and funds. A key benefit of securing an angel is that they contribute more...

Investment agreement This Practice Note acts as guidance for a drafter when preparing and/or reviewing an investment agreement, sometimes described as a subscription and shareholders’ agreement. It concerns the subscription for shares (and, where relevant, loan notes) in a private limited company incorporated in England and Wales by a private equity (or venture capital) fund investor (the investor) together with members of the target company’s senior management team, undertaken as part of a management buyout (MBO). The transaction is assumed to proceed on a split exchange and completion basis, ie completion of the investment agreement is subject to conditions. Set out below are issues to consider when drafting and/or reviewing the key provisions of an investment agreement (IA). Parties The investee companies In a typical buyout, the most straightforward structure is to incorporate a new company to acquire the target business or company (the target). More commonly, however, a buyout structure involves incorporating two or more new companies, each performing a different function within the new...

This Agreement is dated [ insert date ] Parties [ Insert name of investee company ], a company incorporated in England and Wales with number [ insert company number ], whose registered office is at [ insert address ], with brief particulars set out in Schedule 1 (the Company) The several persons whose names and addresses appear in Part A of Schedule 2 (together, the Founders) [ The several persons whose names and addresses appear in Part B of Schedule 2 (together, the Other Shareholders) and ] [ Insert name of investor ] [ incorporated in England and Wales under number [ insert company number ] whose registered office is at OR of ] [ insert address ] (the Investor) [ (each of the Company, the Founders, the Other Shareholders and the Investor is a Party and, together, the Company, the Founders, the Other Shareholder and the Investor are the Parties). ] BACKGROUND The Investor has agreed to...

This agreement is dated [ insert day and month ] 20[ insert year ] Parties [ Insert name of company in which the shares are held ], incorporated in England and Wales with company number [ insert company number ] and having its registered office at [ insert address ] (the Company), [ Insert name of company in which the shares are held ], incorporated in England and Wales with company number [ insert company number ] and having its registered office at [ insert address ] (Newco 2), [ Insert name of company in which the shares are held ], incorporated in England and Wales with company number [ insert company number ] and having its registered office at [ insert address ] (Newco 3), The various persons named and addressed in Schedule 1 (together, the Managers), and The various persons named and addressed in Schedule 3 and any other such person as defined in clause 1.4 (the Investors) ...

This Agreement is entered into on [ insert date ]. Parties [ Insert name of company in which the shares are held ], incorporated in England and Wales under number [ insert company number ], with its registered office at [ insert address ]; brief particulars appear in Schedule 1, Part A (the Company). The several persons whose names and addresses are listed in Schedule 2 (together, the Founders). [ Insert name of fund ], incorporated in England and Wales under number [ insert company number ], whose registered office is at [ insert address ], together with any other person as described in clause 1.4 (the Investor). Each of the Company, the Founders and the Investor is a Party and, collectively, the Company, the Founders and the Investor are the Parties. Background (A) The Company is a private limited company by shares [ and acts as the holding company of the Subsidiaries ]. Further details relating to the...