16 NEWSLETTER 2021 Share Subscription Agreements* Hazel Coşkun Baylan Share subscription agreements, which are commonly encountered in start-up investments, set out the terms and conditions of an investor’s participation in a company as a shareholder by subscribing the new shares issued in a capital increase. This article examines the purpose and key provisions of share subscription agreements. Purpose In case of share subscription via capital increase, an investor pays the subscription price -- in other words the investment amount -- to the company. The investment amount is calculated in accordance with the company valuation, which is injected into the capital by way of a capital increase with share premium. In a capital increase with a share premium, the amount corresponding to the nominal value of newly subscribed shares are transferred to the company’s capital account, and the remaining amount is transferred to a capital reserve account. Thus, the company uses the share premium amount transferred to a capital reserve account for conducting and developing its business. How the investment amount will be used by the company (for instance, product development, expansion abroad, marketing activities, etc.) is designated in the share subscription agreement. The difference between a share subscription agreement and a share purchase agreement arises here. In the transfer of shares, the transfer price of the shares is paid by the transferee to the transferor shareholder and the transferor shareholder uses the transfer price as they wish. Whereas, in share subscription, the investment amount is paid to the company and used by the company for a specific purpose. * Article of December, 2021
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