What Documents Should Be Reviewed Before Signing a Subscription Agreement?
Short answer. Review the offering memorandum, term sheet, subscription agreement, and governing or investor rights documents as one package. Check the costs, ownership, payment mechanics, transfer limits, and risk disclosures against one another. Have your own qualified attorney examine the documents and resolve gaps or verbal promises before you sign.
Read the subscription agreement with the full offering and ownership package before signing. The subscription form records your commitment, while other documents may define the rights, costs, and risks that govern it.
Understand the Offering and Its Terms
Request the private placement memorandum if one is provided. Review its description of the company or fund, financial information, risk factors, investment structure, and investor eligibility survey. A term sheet may be included or delivered separately. Compare the stated investment amount and security with the subscription agreement.
For a company investment, check the term sheet for the number and price of shares, whether they are common or preferred, and any preference, participation, pro rata, pre-emptive, conversion, or board rights. Ask how each right works in a sale, a new financing, or a period of financial difficulty. Do not assume a label such as "preferred" answers those questions.
Read the Ownership and Governance Records
Request the current capitalization table or share register. Compare the ownership description with the securities being offered and ask how your shares or interest will be recorded after closing. Depending on the structure, related documents may include a shareholder or stockholder agreement, investor rights agreement, amended or restated certificate of incorporation, options agreement, voting trust, or officer indemnification agreement.
Read these documents together. One document may set a right while another limits its use or creates a different process. Check voting, information access, transfer restrictions, dilution, and the treatment of each share class. If the investment is in a fund or partnership, review its governing agreement and any side letter alongside the subscription package. For a focused review of negotiated protections, see investor protections to settle before funding.
Check the Subscription Mechanics
Read the subscription agreement for the amount committed, payment timing, conditions to acceptance, investor representations, confidentiality terms, transfer provisions, and any additional risk disclosures. Follow every reference to an exhibit, schedule, or separate agreement and request anything missing. Confirm what evidence you will receive that the company or fund accepted the subscription and recorded your ownership.
- "Which document controls if the term sheet and subscription agreement differ?"
- "Are all exhibits and schedules included in this package? Have you included each referenced agreement?"
- "What security or interest will be issued, and what record confirms my ownership?"
- "Do any investor rights depend on a separate agreement or approval?"
- "Have any terms or risk disclosures changed since the earlier draft? Has the offering amount changed?"
Resolve Differences Before Signing
Create a short list of material terms and note where each appears. Look for inconsistent amounts, dates, defined terms, missing signatures, blank fields, and promises that appear only in conversation or email. Ask for a corrected document or an amendment if the papers do not match the agreed terms. Compare factual claims with representations that may need independent checking.
Have your own qualified attorney review the complete package before signing. Legal effect depends on the wording and applicable law, so discuss unclear provisions, transfer limits, available remedies, and whether the terms can be enforced with counsel. Talk with your CPA about tax provisions that affect your circumstances. Keep the final signed versions and confirm that they match the documents you reviewed before sending funds.
Checklist
- Obtain the offering memorandum and term sheet.
- Obtain the complete subscription agreement.
- Review the governing agreement and investor rights documents.
- Compare ownership records with the security being offered.
- Collect and review every referenced exhibit and schedule.
- Resolve material differences in the final written documents.
- Have your attorney review the package before signing.
Go deeper: What evidence should a family office require before committing capital to a fund?.
Sources: The Single Family Office. Informational only, not financial, legal or tax advice.