Share Subscription Agreement under Companies Act 2013: Everything You Need to Know
A Share Subscription Agreement (SSA) is a crucial document that outlines the terms and conditions of a company’s issuance of new shares to subscribers. The SSA is a legally binding document that protects both the company and the subscribers. Under the Companies Act 2013, all Indian companies that intend to issue new shares through a private placement or a public issue must follow the guidelines set forth in the Act.
Here’s everything you need to know about the Share Subscription Agreement under Companies Act 2013 and how it can benefit your business:
What is the Share Subscription Agreement?
A Share Subscription Agreement is a contract between the company and the subscriber who wishes to purchase new shares. It outlines the terms and conditions of the share issuance, such as the price, the number of shares being issued, the payment schedule, and any other relevant terms.
Why is the Share Subscription Agreement important?
The SSA is an essential document because it protects both the company and the subscribers. It sets forth the terms and conditions of the share issuance and ensures that both parties understand their obligations and responsibilities. The SSA also provides a framework for dispute resolution and outlines the consequences of any breach of the agreement.
What are the requirements of the Companies Act 2013 for Share Subscription Agreement?
Under the Companies Act 2013, a company must follow certain guidelines when issuing new shares. These guidelines include:
1. The company must issue the shares in compliance with the provisions of the Act, the rules made thereunder, and the articles of association of the company.
2. The company must file a prospectus or a private placement offer letter with the Registrar of Companies before issuing the shares.
3. The company must obtain the consent of the board of directors and the shareholders of the company before issuing the shares.
4. The company must ensure that the shares are issued at a fair price and not lower than the face value of the shares.
5. The company must issue the shares within 60 days of receiving the subscription money from the subscriber.
6. The company must maintain a register of members that contains the details of the shares issued and the subscribers.
What are the benefits of a Share Subscription Agreement?
Here are some benefits of using an SSA for your business:
1. Protection: The SSA protects both the company and the subscriber by setting forth the terms and conditions of the share issuance, including payment schedules, price, and other relevant terms.
2. Legal compliance: The SSA ensures that the company complies with the guidelines set forth in the Companies Act 2013 for issuing new shares.
3. Clarity: The SSA provides clarity on the obligations and responsibilities of both the company and the subscriber.
4. Dispute resolution: The SSA provides a framework for dispute resolution and outlines the consequences of any breach of the agreement.
In conclusion, the Share Subscription Agreement under Companies Act 2013 is an essential document that outlines the terms and conditions of a company’s issuance of new shares to subscribers. It protects both the company and the subscribers, ensures legal compliance, provides clarity, and outlines dispute resolution. Therefore, it is recommended that companies seek legal advice and draft an SSA before issuing new shares.