Can (or should) a subscription agreement be combined with a shareholders’ agreement?

1. In Singapore, it is possible for a subscription agreement to be combined with a shareholders’ agreement, but whether it should be done depends on the specific circumstances of the transaction and the parties involved.

2. A subscription agreement typically sets out the terms on which a new investor (subscriber) agrees to invest in a company. It usually covers details such as the number of shares being purchased, the purchase price, any conditions precedent to the completion of the transaction, and warranties provided by the parties.

3. A shareholders’ agreement, on the other hand, governs the relationship between the shareholders of a company and sets out their rights, obligations, and responsibilities. It may cover matters such as the management and operation of the company, the voting and other rights of shareholders, transfer of shares, reserved matters, dispute resolution mechanisms, and etc.

4. Combining a subscription agreement with a shareholders’ agreement can be useful in certain situations where the parties wish to streamline the transaction and ensure that all relevant terms are clearly set out in one document. This can help to avoid any potential conflicts or discrepancies between the two agreements.

5. However, there are also some potential drawbacks to combining the two agreements. For example, a subscription agreement is typically a one-time transaction document that deals with the specific terms of the share subscription, whereas a shareholders’ agreement is an ongoing document that governs the ongoing relationship between the shareholders. Combining the two agreements may result in confusion or ambiguity regarding the timing and applicability of certain terms.

6. Additionally, in some cases, parties may prefer to keep certain terms confidential or separate from others, which may be difficult if everything is combined into one agreement.

7. Ultimately, whether a subscription agreement should be combined with a shareholders’ agreement in Singapore depends on the specific circumstances and preferences of the parties involved. As a professional firm, our specialization in the start-up space especially for entities that are backed by institutional and VC investors throughout their series of fundraising rounds would recommend that the subscription and shareholders’ agreements be kept separate.

17 June 2024