On April 26, 2019, PTC India Limited (PTC) implemented a SSA and sha with BSE Investments Limited (“BSE”) and ICICI Bank Limited (“ICICI”) for investments in a company (proposed new electricity exchange). The SSA/SHA regulates rights and obligations between the company`s shareholders. It is proposed to establish and operate a new electricity exchange in India, subject to relevant approvals under existing legislation, which must be sought by the company. There are also some risks associated with implementing a shareholder agreement in some countries. A shareholders` pact (sometimes called the U.S. Shareholders` Pact) (SHA) is an agreement between shareholders or members of a company. In practice, it is analogous to a partnership agreement. It can be said that some legal systems do not properly define the concept of a shareholders` pact, regardless of the definition of the particular consequences of these agreements. There are advantages to the shareholder agreement; to be precise, it helps the company maintain the absence of advertising and maintain confidentiality.
Nevertheless, some drawbacks should be taken into account, such as the limited effect on third parties (particularly assignees and stock buyers) and the change of agreed items may take time. As mentioned above, a stock subscription is just one type of stock offer document. If your investor has not applied for an equity subscription contract, it would not be in the company`s interest to offer it. Another alternative is a share offer/subscription letter in shares. This is a shorter document that still contains the main conditions and mechanics of the investment, but does not contain business or business creation guarantees. Instead, the investor must perform his own due diligence. A stock offer/subscription letter is often used in or Series A rounds when carried by family and friends or angel investors. This is less important in future cycles or among venture capitalists.
If you leave a VC, you will probably insist on a share subscription contract containing detailed presentations and guarantees from the company and the founders. However, they may seek advice or consultation with a start-up lawyer to mitigate the potential negative effects of these provisions. A share subscription contract would be necessary if the company wants to raise funds and in particular by issuing shares, by not diluting the share of the owners. He uses that money for his own purposes. Normally, the founders of the company use their own money at the beginning of the business, but ultimately, the founders must look for money from angel investors or friends or strangers who must be spent in exchange for shares for the investment.