Preferred Stock Subscription Agreement for the United Kingdom

Preferred Stock Subscription Agreement Template for England and Wales

A Preferred Stock Subscription Agreement under English and Welsh law is a legally binding document that governs the issuance of preferred shares by a company to investors. It sets out the terms of the investment, including the number and price of shares being issued, the rights attached to those shares, and various warranties and undertakings given by both the company and the investors. The agreement is subject to English and Welsh company law, particularly the Companies Act 2006, and may also need to comply with financial services regulations if the company is listed or the offering is made to the public.

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What is a Preferred Stock Subscription Agreement?

The Preferred Stock Subscription Agreement is a crucial document used when a company wishes to raise capital by issuing preferred shares to investors. It is particularly common in venture capital and private equity transactions under English and Welsh law. The agreement details the investment terms, share rights (including preferential rights to dividends and capital), protective provisions, and any special voting or board appointment rights. It ensures compliance with the Companies Act 2006 and other relevant regulations while protecting both the company's and investors' interests. The document typically includes comprehensive warranties about the company's condition and various conditions precedent that must be satisfied before completion.

What sections should be included in a Preferred Stock Subscription Agreement?

1. Parties: Identification of the company issuing shares and the investor(s)

2. Background: Context of the investment and purpose of the agreement

3. Definitions: Key terms used throughout the agreement

4. Subscription: Details of shares being subscribed for, including price and number

5. Completion: Conditions precedent and completion mechanics

6. Warranties: Company warranties and investor warranties

7. Preferred Rights: Special rights attaching to preferred shares

What sections are optional to include in a Preferred Stock Subscription Agreement?

1. Anti-dilution Protection: Protection against future share issuances, used for larger investments

2. Board Appointment Rights: Rights to appoint directors, typically for significant investors

3. Information Rights: Rights to receive company information, used for minority investors

What schedules should be included in a Preferred Stock Subscription Agreement?

1. Share Capital Structure: Current and post-investment share capital structure

2. Warranties: Detailed company warranties

3. Rights Attaching to Preferred Shares: Detailed terms of preferred shares

4. Form of Board Resolutions: Pro-forma board resolutions approving the share issuance

5. Disclosure Letter: Exceptions to warranties

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

England and Wales

Publisher

Genie AI

Cost

Free to use
Relevant legal definitions
Clauses
Industries

Companies Act 2006: Primary legislation governing company law in England and Wales, including provisions for share capital, share classes, directors' duties (Sections 171-177), pre-emption rights (Sections 560-577), and share allotment provisions (Sections 549-559)

Financial Services and Markets Act 2000: Establishes the regulatory framework for financial services, including restrictions on financial promotions and prospectus requirements for share offerings

Corporate Governance Code: Provides guidelines and best practices for listed companies regarding share issuance and corporate governance standards

FCA Regulations: Regulatory requirements for listed companies, including Listing Rules, Disclosure and Transparency Rules, and Prospectus Rules

Companies House Requirements: Administrative filing requirements and procedures for registering new share classes and maintaining corporate records

Income Tax Act 2007: Tax legislation relevant to share subscriptions and dividend payments on preferred stock

Corporation Tax Act 2010: Corporate tax implications for companies issuing preferred stock and related transactions

Stamp Duty Regulations: Tax regulations governing stamp duty and stamp duty reserve tax on share transfers and issuances

Money Laundering Regulations 2017: Requirements for due diligence and anti-money laundering checks in financial transactions including share subscriptions

Market Abuse Regulation: EU-derived regulations (retained in UK law) governing market conduct and prevention of market abuse in securities transactions

Articles of Association: Company's constitutional document that must be reviewed and potentially amended to accommodate preferred stock rights and restrictions

Existing Shareholders' Agreements: Pre-existing contracts between shareholders that may affect or need to be modified for the new preferred stock issuance

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