Subscription Agreement Template 2025
Professional subscription agreement template with comprehensive guide. Learn what a subscription agreement is, how to fill it out, and download our template designed by legal experts for investment rounds, private placements, and equity subscriptions.
Download TemplateWhat is a Subscription Agreement?
A subscription agreement is a legal contract between a company and an investor for the purchase of securities in a private offering. It outlines the investment terms, investor representations and warranties, company disclosures, and conditions for the securities purchase, serving as the primary document that governs private placements and investment rounds. Subscription agreements are essential for documenting investor commitments, ensuring regulatory compliance, and protecting both companies and investors in securities transactions outside of public markets.
Subscription agreements serve as the foundation for private securities offerings by providing a comprehensive framework for investment transactions while ensuring compliance with federal and state securities laws. They enable companies to raise capital from accredited investors, angel investors, and institutional investors while providing legal protection through extensive representations, warranties, and disclosure requirements. These agreements are particularly important for startups, growing companies, and private equity transactions where companies need to access capital markets without the expense and complexity of public offerings.
📋 Key Components of a Subscription Agreement
- Investment terms - amount, securities type, and price per share
- Investor representations - accreditation status and investment suitability
- Company disclosures - business information and risk factors
- Closing conditions - requirements for completing the investment
- Transfer restrictions - limitations on resale of securities
- Regulatory compliance - securities law and exemption requirements
- Subscription procedures - process for accepting and funding investment
Types of Securities Offerings and Investment Structures
Offering Type | Securities Issued | Investor Requirements | Common Applications |
---|---|---|---|
Regulation D 506(b) | Equity or debt securities | Accredited investors only | Venture capital, private equity |
Regulation D 506(c) | Any securities | Verified accredited investors | General solicitation allowed |
Regulation A+ | Up to $75M annually | Public and accredited investors | Mini-IPOs, crowdfunding |
Regulation CF | Up to $5M annually | General public investors | Crowdfunding platforms |
SAFE/Convertible Notes | Convertible instruments | Typically accredited investors | Seed funding, bridge rounds |
Private Placements (Regulation D)
- Rule 506(b) Offerings: Up to 35 non-accredited sophisticated investors plus unlimited accredited investors
- Rule 506(c) Offerings: Only verified accredited investors but general solicitation permitted
- No Dollar Limit: No maximum offering amount under Rule 506
- Resale Restrictions: Securities are restricted and cannot be readily resold
- Filing Requirements: Form D filing required within 15 days of first sale
- Bad Actor Provisions: Disqualification for certain regulatory violations
SAFE and Convertible Note Offerings
- Simple Agreement for Future Equity (SAFE): Convertible instrument without debt features
- Convertible Notes: Debt instruments that convert to equity upon triggering events
- Valuation Caps: Maximum valuation for conversion to protect early investors
- Discount Rates: Preferred pricing for early investors in conversion
- Most Favored Nation: Rights to same terms as later investors
- Pro Rata Rights: Rights to participate in future funding rounds
Equity Securities Offerings
- Preferred Stock: Special rights, preferences, and liquidation priorities
- Common Stock: Basic ownership shares with voting rights
- Series Designations: Different classes with varying rights and preferences
- Anti-Dilution Protection: Protection against dilution in future rounds
- Dividend Rights: Preferred dividend payments and cumulative features
- Conversion Rights: Rights to convert preferred to common stock
✅ Benefits of Subscription Agreements
- Legal Protection: Comprehensive investor and company protections
- Regulatory Compliance: Adherence to securities law requirements
- Investment Documentation: Clear terms and conditions for investment
- Risk Disclosure: Proper disclosure of investment risks and company information
- Transfer Controls: Restrictions to maintain private offering exemptions
Essential Subscription Agreement Components
Investment Terms and Securities Details
- Securities Type: Common stock, preferred stock, or convertible instruments
- Investment Amount: Total subscription amount and number of shares
- Purchase Price: Price per share or conversion terms
- Payment Terms: Cash payment requirements and timing
- Closing Date: Date for completing the investment transaction
- Use of Proceeds: Company's intended use of investment funds
Investor Representations and Warranties
- Accredited Investor Status: Financial qualification under SEC regulations
- Investment Experience: Sophistication and knowledge of investment risks
- Investment Intent: Investment for own account, not for resale
- Financial Capacity: Ability to bear economic risk of investment
- Information Access: Opportunity to ask questions and receive company information
- Legal Capacity: Authority to enter into the investment agreement
Company Representations and Disclosures
- Corporate Existence: Valid incorporation and good standing
- Authorization: Corporate authority to issue securities and enter agreement
- Financial Information: Accuracy of provided financial statements
- Material Contracts: Disclosure of significant agreements and obligations
- Litigation: Pending or threatened legal proceedings
- Compliance: Adherence to applicable laws and regulations
Securities Law Compliance Provisions
- Private Placement Exemption: Reliance on specific SEC rule exemptions
- No Registration: Securities not registered under Securities Act
- Transfer Restrictions: Limitations on resale and transfer of securities
- Legend Requirements: Restrictive legends on stock certificates
- Stop Transfer Instructions: Transfer agent restrictions on sales
- Holding Period: Minimum holding requirements under Rule 144
Subscription Process and Procedures
- Subscription Acceptance: Company's right to accept or reject subscriptions
- Minimum Investment: Minimum subscription amounts if applicable
- Maximum Offering: Total amount of securities being offered
- Subscription Deadline: Final date for accepting subscriptions
- Escrow Arrangements: Third-party holding of subscription funds
- Closing Conditions: Conditions that must be met before closing
Rights and Preferences (for Preferred Stock)
- Liquidation Preference: Priority in distribution of proceeds
- Dividend Rights: Preferred dividend rates and payment terms
- Anti-Dilution Protection: Adjustment for future issuances at lower prices
- Conversion Rights: Rights to convert to common stock
- Voting Rights: Special voting rights and protective provisions
- Participation Rights: Right to participate in proceeds after preference
⚠️ Common Subscription Agreement Pitfalls
- Inadequate investor accreditation verification and documentation
- Insufficient disclosure of company risks and material information
- Failure to comply with applicable securities law exemptions
- Missing or improper transfer restrictions and legends
- Unclear or incomplete investment terms and conditions
- Inadequate subscription process and investor qualification procedures
How to Fill Out a Subscription Agreement: Step-by-Step Guide
Specify: Investment amount, securities type, and offering structure.
- Identify type of securities being offered (common, preferred, convertible)
- Set investment amount and price per share or conversion terms
- Define total offering size and minimum investment amounts
- Establish closing date and subscription deadline
- Include use of proceeds and business purposes
Document: Investor qualifications and suitability requirements.
- Verify accredited investor status with supporting documentation
- Confirm investment experience and financial sophistication
- Establish investment intent and holding period understanding
- Document financial capacity to bear investment risks
- Include authority and legal capacity representations
Provide: Company information and material disclosures.
- Corporate existence, authorization, and good standing
- Financial statement accuracy and accounting representations
- Material contract and business relationship disclosures
- Litigation, regulatory, and compliance representations
- Risk factor disclosures and business uncertainties
Ensure: Compliance with applicable securities regulations.
- Identify specific securities law exemption being relied upon
- Include transfer restrictions and resale limitations
- Add required legends and stop transfer instructions
- Address filing requirements and regulatory compliance
- Include bad actor and disqualification provisions
Specify: Special rights and preferences for preferred securities.
- Liquidation preferences and priority distributions
- Dividend rights and payment terms
- Anti-dilution protection and adjustment mechanisms
- Conversion rights and triggering events
- Voting rights and protective provisions
Add: Subscription procedures and legal protections.
- Subscription acceptance and rejection procedures
- Escrow arrangements and fund handling
- Closing conditions and completion requirements
- Dispute resolution and governing law provisions
- Indemnification and risk allocation terms
⚠️ Securities Law and Regulatory Compliance
Subscription agreements involve complex federal and state securities laws that can result in significant liability for non-compliance. These agreements must comply with SEC regulations, state blue sky laws, and applicable exemption requirements. Professional legal advice from experienced securities attorneys is essential for proper offering structure, investor qualification, and regulatory compliance. Consider anti-fraud provisions, filing requirements, and ongoing compliance obligations for private offerings.
Investor Qualification and Verification Requirements
Accredited Investor Standards
- Income Test: $200,000 individual or $300,000 joint income for two years with expectation of continuation
- Net Worth Test: $1 million net worth excluding primary residence
- Professional Credentials: Series 7, 65, or 82 licenses in good standing
- Knowledgeable Employees: Employees of private fund advisers meeting certain criteria
- Entity Tests: Banks, insurance companies, registered investment companies, and business development companies
- Large Entity Test: Entities with assets exceeding $5 million not formed for the investment
Verification Requirements (Rule 506(c))
- Income Verification: Tax returns, W-2s, and third-party documentation
- Net Worth Documentation: Bank statements, brokerage statements, and property valuations
- Professional Certification: Written confirmation from CPA, attorney, or broker-dealer
- Credit Reports: Consumer reports from nationwide consumer reporting agencies
- Third-Party Verification: Independent verification by registered investment advisers
- Reasonable Steps Standard: Verification methods that are reasonable under the circumstances
Sophisticated Investor Standards (Rule 506(b))
- Business and Financial Experience: Knowledge and experience in financial and business matters
- Evaluation Capability: Ability to evaluate merits and risks of investment
- Purchaser Representative: Sophisticated third party acting on behalf of investor
- Investment Experience: Prior experience with similar investments
- Professional Advice: Access to professional advisors and consultation
- Due Diligence: Demonstrated ability to conduct investment analysis
International and Offshore Investors
- Regulation S: Offshore transactions with no U.S. solicitation
- Category 1 Countries: No additional restrictions for certain offshore markets
- Category 2 and 3: Additional offering restrictions and resale limitations
- Distribution Compliance Period: Restricted period for resales into U.S. markets
- Legend Requirements: Special legends for offshore securities
- FATCA Compliance: Foreign Account Tax Compliance Act requirements
Institutional and Qualified Purchasers
- Qualified Institutional Buyers (QIBs): Institutions with $100 million in securities
- Qualified Purchasers: High net worth individuals and institutions under Investment Company Act
- Bank Holding Companies: Banks and their subsidiaries meeting asset tests
- Insurance Companies: Licensed insurance companies and separate accounts
- Investment Companies: Registered investment companies and business development companies
- Employee Benefit Plans: ERISA plans with $5 million in assets
Bad Actor Disqualification
- Covered Persons: Issuers, predecessors, affiliates, directors, officers, and promoters
- Disqualifying Events: Criminal convictions, regulatory sanctions, and court injunctions
- Lookback Period: Five to ten years depending on the type of disqualifying event
- Reasonable Care Exception: Due diligence to determine bad actor status
- Disclosure Requirement: Disclosure of disqualifying events occurring before September 23, 2013
- Waiver Provisions: SEC authority to waive disqualification upon showing of good cause
💡 Investor Verification Best Practices
- Implement standardized investor qualification procedures and documentation
- Use third-party verification services for Rule 506(c) offerings
- Maintain comprehensive investor files and qualification records
- Update investor status for subsequent offerings and investments
- Ensure bad actor diligence and disclosure compliance
- Consider jurisdictional requirements for international investors
Frequently Asked Questions
Rule 506(b) allows sales to unlimited accredited investors plus up to 35 sophisticated non-accredited investors, but prohibits general solicitation. Rule 506(c) permits general solicitation and advertising but requires that all investors be accredited investors with verification of their accredited status. Rule 506(c) also requires "reasonable steps" to verify accredited investor status through income documentation, net worth verification, or third-party confirmation.
Verification methods include: (1) Reviewing tax returns, W-2s, and 1099s for income qualification, (2) Bank statements, brokerage statements, and appraisals for net worth, (3) Written confirmation from CPA, attorney, or registered broker-dealer, (4) Consumer credit reports from nationwide agencies, (5) Third-party verification services, and (6) Professional licenses (Series 7, 65, 82). The verification must be reasonable under the circumstances and completed within three months before the sale.
Transfer restrictions should include: (1) Securities are not registered and cannot be resold without registration or exemption, (2) Right of first refusal or co-sale rights for the company, (3) Minimum holding periods under Rule 144, (4) Restrictive legends on certificates, (5) Stop transfer instructions to transfer agents, (6) Tag-along and drag-along rights, and (7) Approval requirements for transfers to maintain exemption status. These restrictions help maintain the private offering exemption and provide liquidity controls.
Key disclosures include: (1) Business description and strategy, (2) Financial statements and condition, (3) Use of proceeds from the offering, (4) Risk factors and uncertainties, (5) Management and key personnel, (6) Material contracts and relationships, (7) Legal proceedings and regulatory matters, (8) Tax consequences of the investment, (9) Prior securities offerings and ownership, and (10)Exit strategy and liquidity limitations. The disclosure should be sufficiently detailed to allow investors to make informed investment decisions.
SAFE and convertible note subscriptions should address: (1) Conversion triggers (qualified financing, liquidity events, maturity), (2) Valuation caps and discount rates for investor protection, (3) Most favored nation provisions for future investor rights, (4) Pro rata participation rights in future rounds, (5) Information rights and reporting requirements, (6) For notes: interest rates, maturity dates, and default provisions, (7) Anti-dilution protection and adjustment mechanisms, and (8) Dissolution and liquidation preferences. These instruments provide flexible early-stage funding while deferring valuation discussions.
Non-compliance consequences include: (1) SEC enforcement actions and penalties, (2) State securities violations and sanctions, (3) Investor rescission rights and damage claims, (4) Criminal liability for willful violations, (5) Disqualification from future exemptions, (6) Disgorgement of proceeds and monetary penalties, (7) Injunctive relief preventing future offerings, and (8) Reputational damage and business disruption. Proper legal counsel and compliance procedures are essential to avoid these serious consequences.
International investors require consideration of: (1) Regulation S compliance for offshore transactions, (2) No U.S. solicitation or directed selling efforts, (3) Distribution compliance periods for resale restrictions, (4) Category-specific offering restrictions by jurisdiction, (5) FATCA reporting and withholding requirements, (6) Tax treaty benefits and withholding optimization, (7) Anti-money laundering and KYC procedures, and (8) Local securities law compliance in investor jurisdictions. Specialized legal counsel is recommended for international offerings.
Preferred stock subscriptions should include: (1) Liquidation preferences and participation rights, (2) Dividend rates and payment terms, (3) Anti-dilution protection (weighted average or full ratchet), (4) Conversion rights and automatic conversion triggers, (5) Voting rights and protective provisions, (6) Board representation and governance rights, (7) Information and inspection rights, (8) Tag-along and drag-along provisions, (9) Right of first refusal and co-sale rights, and (10) Registration rights for future liquidity. These terms define the economic and control rights of preferred investors.
Risk Factors and Due Diligence Considerations
Business and Operational Risks
- Market Competition: Competitive pressures and market saturation risks
- Technology Dependence: Reliance on proprietary or third-party technology
- Key Personnel: Dependence on key management and technical personnel
- Customer Concentration: Reliance on major customers or distribution channels
- Regulatory Changes: Impact of changing industry regulations
- Economic Conditions: Sensitivity to economic downturns and market conditions
Financial and Liquidity Risks
- Going Concern: Ability to continue operations and meet obligations
- Capital Requirements: Future funding needs and dilution risk
- Revenue Concentration: Dependence on limited revenue sources
- Liquidity Limitations: Restricted transferability and exit options
- Valuation Uncertainty: Difficulty in determining fair value
- Loss of Investment: Risk of total loss of invested capital
Legal and Regulatory Risks
- Securities Law Compliance: Ongoing compliance with exemption requirements
- Intellectual Property: IP disputes and infringement claims
- Litigation Exposure: Pending and potential legal proceedings
- Regulatory Approval: Required licenses and governmental approvals
- Environmental Liability: Environmental compliance and cleanup costs
- Data Privacy: Compliance with data protection regulations
Investment-Specific Risks
- Minority Position: Limited control and influence over company decisions
- Dilution Risk: Future equity issuances reducing ownership percentage
- Liquidation Preference: Junior status to preferred shareholders
- Tag-Along/Drag-Along: Forced participation in sale transactions
- Board Representation: Limited or no board representation rights
- Information Access: Restricted access to company information
Technology and Cybersecurity Risks
- Cybersecurity Threats: Data breaches and cyber attacks
- Technology Obsolescence: Rapid technological changes
- System Failures: IT system disruptions and failures
- Data Loss: Loss of critical business data
- Third-Party Dependencies: Reliance on external technology providers
- Compliance Requirements: Technology-related regulatory compliance
Due Diligence Areas
- Financial Review: Financial statements, projections, and accounting practices
- Legal Analysis: Corporate structure, material contracts, and litigation
- Business Assessment: Market position, competitive advantages, and strategy
- Management Evaluation: Leadership team experience and track record
- Technology Review: IP portfolio, technology stack, and development capabilities
- Operational Analysis: Business processes, scalability, and operational efficiency
⚠️ Critical Risk Disclosure Requirements
- Comprehensive disclosure of all material risks and uncertainties
- Specific risks related to the company's business and industry
- Investment-specific risks including liquidity and control limitations
- Forward-looking statement disclaimers and projection risks
- Regular updates on material changes and developments
- Professional liability and D&O insurance coverage limitations
International and Tax Considerations
Cross-Border Investment Structures
- Regulation S Compliance: Offshore transactions with no U.S. solicitation
- Category Classifications: Different restrictions based on investor jurisdiction
- Distribution Compliance Period: Restricted period for U.S. resales
- Offshore Intermediaries: Use of international placement agents
- Local Law Compliance: Securities regulations in investor jurisdictions
- Currency Considerations: Multi-currency investments and hedging
Tax Implications for Investors
- Capital Gains Treatment: Long-term vs. short-term capital gains
- Section 1202 Benefits: Qualified small business stock exclusion
- Section 83(b) Elections: Early tax recognition for restricted stock
- Passive Activity Rules: Limitations on loss deductions
- At-Risk Limitations: Restrictions on deductible losses
- State Tax Considerations: Varying state tax treatments
International Tax Compliance
- FATCA Reporting: Foreign Account Tax Compliance Act requirements
- Withholding Obligations: U.S. withholding on foreign investors
- Tax Treaty Benefits: Reduced withholding rates under treaties
- CRS Reporting: Common Reporting Standard for automatic information exchange
- Transfer Pricing: Related party transaction pricing
- Permanent Establishment: Tax presence in multiple jurisdictions
Entity Structure Considerations
- Pass-Through Entities: LLCs, partnerships, and S corporations
- Corporate Structure: C corporation tax treatment
- Delaware vs. Other States: Incorporation jurisdiction benefits
- International Holding Companies: Offshore structure optimization
- Investment Funds: Fund structure for multiple investors
- Blocker Structures: Preventing UBTI for tax-exempt investors
Anti-Money Laundering (AML) and KYC
- Customer Identification: Identity verification requirements
- Beneficial Ownership: Ultimate beneficial owner identification
- Source of Funds: Documentation of investment source
- Sanctions Screening: OFAC and international sanctions compliance
- PEP Identification: Politically exposed person screening
- Ongoing Monitoring: Continuous compliance and updates
Regulatory Considerations by Jurisdiction
- European Union: MiFID II and Prospectus Regulation compliance
- United Kingdom: FCA rules and Brexit implications
- Canada: Provincial securities regulations and passport system
- Asia-Pacific: Jurisdiction-specific offering requirements
- Emerging Markets: Capital controls and foreign investment restrictions
- Tax Havens: Substance requirements and regulatory scrutiny
💡 International Investment Best Practices
- Engage experienced international securities counsel in relevant jurisdictions
- Implement robust KYC and AML procedures for international investors
- Consider tax-efficient structures for cross-border investments
- Ensure compliance with FATCA and CRS reporting requirements
- Review withholding and treaty obligations for foreign payments
- Monitor regulatory changes in key investor jurisdictions
Post-Investment Management and Ongoing Compliance
Investor Relations and Communication
- Regular Reporting: Quarterly and annual investor updates
- Financial Statements: Audited and interim financial reporting
- Business Updates: Material developments and milestone progress
- Board Communications: Board meeting minutes and resolutions
- Information Rights: Inspection and information access procedures
- Investor Meetings: Annual meetings and special presentations
Securities Law Compliance
- Form D Filings: Timely filing of federal notice forms
- State Filings: Blue sky law compliance and renewal filings
- Annual Updates: Ongoing exemption maintenance
- Transfer Monitoring: Tracking secondary transfers and compliance
- Beneficial Ownership: Section 16 and beneficial ownership reporting
- Integration Issues: Coordination with subsequent offerings
Corporate Governance
- Board Composition: Investor representation and independent directors
- Voting Agreements: Coordination of voting and governance rights
- Protective Provisions: Investor approval rights and veto powers
- Committee Structure: Audit, compensation, and governance committees
- Conflict Management: Related party transactions and conflicts
- Fiduciary Duties: Director and officer obligations
Liquidity and Exit Planning
- Exit Strategy Development: IPO, strategic sale, or management buyout planning
- Registration Rights: Demand and piggyback registration procedures
- Tag-Along Rights: Participation in third-party sales
- Drag-Along Rights: Forced participation in majority sales
- Right of First Refusal: Company and investor preemptive rights
- Valuation Methodology: Fair value determinations for transfers
Risk Management and Insurance
- Directors and Officers Insurance: Liability coverage for management
- Errors and Omissions: Professional liability coverage
- Cyber Liability: Data breach and cybersecurity insurance
- General Liability: Business operations and premises coverage
- Key Person Insurance: Life insurance on critical personnel
- Representations and Warranties: Transaction-specific insurance
Performance Monitoring and Reporting
- Key Performance Indicators: Business and financial metrics tracking
- Milestone Achievement: Progress against business plan objectives
- Financial Controls: Internal controls and audit procedures
- Compliance Monitoring: Regulatory and contractual compliance
- Benchmarking: Industry and peer comparison analysis
- Value Creation: Strategic initiatives and growth opportunities
✅ Post-Investment Success Factors
- Establish clear investor communication and reporting procedures
- Maintain ongoing securities law and regulatory compliance
- Implement strong corporate governance and oversight structures
- Plan for liquidity events and exit opportunities
- Monitor performance against business plan and investor expectations
- Maintain appropriate insurance coverage for business risks
Download Your Subscription Agreement Template
Our comprehensive subscription agreement template includes all the essential provisions you need to properly structure and document private securities offerings. The template is professionally drafted by experienced securities attorneys and can be customized for various offering types and investment structures.
What's Included in Our Template:
- Complete Agreement Framework: All essential sections and securities law provisions for comprehensive private offerings
- Flexible Structure: Customizable for different securities types and offering structures
- Regulatory Compliance: Comprehensive securities law compliance and exemption provisions
- Investor Protection: Detailed representations, warranties, and disclosure requirements
- Implementation Guide: Step-by-step instructions for offering preparation and execution
- Supporting Documents: Investor qualification forms and verification procedures
💼 Template Features
- Covers all major subscription agreement provisions and requirements
- Includes both standard and sophisticated investment structures
- Professional legal drafting with clear language and comprehensive terms
- Customizable for various offering types and securities structures
- Current with latest securities law and regulatory developments
- Compatible with federal and state private offering exemptions
⚠️ Important Legal and Securities Disclaimer
This template is provided for informational purposes only and does not constitute legal, investment, or securities advice. Subscription agreements involve complex federal and state securities laws, investor qualification requirements, and regulatory compliance issues that vary by jurisdiction, offering type, and investor characteristics. While our templates are professionally prepared, every securities offering is unique and may require specific legal, regulatory, and compliance provisions. We strongly recommend consulting with qualified securities attorneys, compliance professionals, and investment advisors to ensure your subscription agreement meets your specific needs and complies with all applicable securities laws and regulations.