Also known as: stock subscription · stock subscription agreement · stock subscription agreements · subscription agreement · stock purchase agreement
Written by attorneys · grounded in primary & secondary sources — see below
An agreement by which a person commits to purchase shares from a corporation for a stated consideration. The commitment binds the subscriber according to its terms and any applicable statutory rules governing formation and payment.
Stephen Shaw signed a preincorporation subscription agreement in January to buy shares in a new grain cooperative. In March he sent written notice attempting to withdraw after grain prices fell. The corporation was formed in April and later demanded payment. Shaw's notice did not revoke the agreement because six months had not elapsed and the other subscribers had not consented.
Stella Shapiro and other subscribers agreed to purchase the same class of shares in a startup before incorporation. Some were to contribute equipment and others cash. After formation the board demanded immediate cash payment from cash subscribers but allowed equipment contributors a ninety-day deferral. The nonuniform call violated the requirement that payment terms be uniform for shares of the same class.
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Steven Silva purchased shares directly from Spectrum Financial under a subscription agreement that required part cash and part future services. When the corporation later became insolvent, creditors sued Silva personally for the company's unpaid debts. Silva's only obligation was to provide the consideration specified in the agreement. Once that consideration is paid, no further personal liability to creditors arises from the share purchase.
Santiago Sanchez and other investors signed subscription agreements promising cash and property to a new corporation. The contributions formed the capital stock that the corporation used to begin operations. The agreements established the financial basis for the business and created the fund represented by the issued shares.
Sarah Sullivan, a minority shareholder in a close corporation, learned that the controlling family had redeemed shares from one member at book value while refusing a similar offer to her. The redemption was accomplished through a subscription-type arrangement funded by the corporation. The transaction raised questions of equal treatment among shareholders who held the same class of stock.
Sierra Santos signed a subscription agreement for shares in a closely held company. The agreement was later scrutinized in an insider-trading investigation because Santos had received material nonpublic information from a corporate insider before signing. The subscription itself created an obligation to pay the stated consideration once the shares were issued.
A subscription entered into before incorporation is irrevocable for six months unless the agreement itself provides a different period or all subscribers consent to revocation. This rule stabilizes capital commitments during the vulnerable formation stage.
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The board may set payment terms when the subscription agreements are silent, but any call must be uniform so far as practicable for all shares of the same class or series. Nonuniform treatment exceeds the board's authority unless the agreements expressly permit it.
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A purchaser is liable only to pay the consideration specified in the subscription agreement or authorized for issuance. Once that consideration is provided, the purchaser has no further personal liability to the corporation or its creditors on the shares themselves.
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…between Harry Rodd and the company in which the company would purchase forty-five shares for $800 a share ($36,000). The stock purchase agreement was formalized between the parties on July 13, 1970. Two days later, a sale pursuant to the July 13 agreement was consummated. At approximately the same time, Harry Rodd resigned his last…