Expert's guide to understanding Shareholder's Agreement (SHA) and Subscription Agreement (SSA) | Summary and Q&A

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October 17, 2022
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Jungle Ventures
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Expert's guide to understanding Shareholder's Agreement (SHA) and Subscription Agreement (SSA)

TL;DR

Investment documents, such as subscription agreements, shareholders agreements, and articles of the company, govern the financial and operational aspects of investor funding in founders-led companies.

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Questions & Answers

Q: What is the purpose of a subscription agreement?

A subscription agreement governs how investors provide capital in exchange for shares in a founders-led company. It defines the terms and processes for investing and share distribution within a short time frame.

Q: What does a shareholders agreement entail?

A shareholders agreement outlines the long-term relationship between founders and investors, defining their rights and obligations. It governs the operations and decision-making processes within the company for its entire lifespan.

Q: How do articles of the company differ from other investment documents?

Articles of the company serve as the constitutional document for the founders-led company. They replicate the provisions in sales agreements and formalize the company's structure and governance. They are typically finalized at the end of the investment process.

Q: What is the role of lead investors in the document process?

Having a single lead investor or a group of well-aligned investors can streamline the document process. They can provide a solid base for founders to review and comment on, allowing for quicker resolution and closing of the deal.

Summary & Key Takeaways

  • Subscription agreements define the terms of investment and share distribution for investors in a founders-led company, with a short-term functional impact.

  • Shareholders agreements establish long-term relationships and outline rights and obligations for both founders and investors.

  • Articles of the company replicate the provisions in sales agreements and are usually finalized at the end of the process.

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