The Preference Share Subscription Agreement is a crucial document used when a company wishes to raise capital by issuing shares with preferential rights to investors under Hong Kong law. This agreement is commonly used in venture capital, private equity investments, and corporate restructuring scenarios where investors seek enhanced rights compared to ordinary shareholders. The document outlines the complete framework for the share subscription, including share class details, pricing, preferential rights (such as enhanced voting rights, dividend preferences, and liquidation preferences), and protective provisions. It ensures compliance with Hong Kong's Companies Ordinance and Securities and Futures Ordinance while providing necessary legal protections for both the issuing company and investors. The agreement is particularly important for growth-stage companies and serves as a foundational document for the ongoing relationship between the company and its preference shareholders.
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1. Parties: Identification of the Company issuing the preference shares and the Subscriber(s)
2. Background: Context of the transaction, including company status and purpose of the preference share issuance
3. Definitions and Interpretation: Definitions of key terms and interpretation rules for the agreement
4. Subscription and Issue: Core terms of the preference share subscription, including number of shares, price per share, and class of shares
5. Completion: Details of the completion process, timing, and deliverables required from each party
6. Payment Terms: Terms and mechanics of payment for the preference shares
7. Company's Representations and Warranties: Company's confirmations regarding its status, authority, and business condition
8. Subscriber's Representations and Warranties: Subscriber's confirmations regarding authority, financial capacity, and investment intentions
9. Conditions Precedent: Conditions that must be satisfied before completion can occur
10. Preference Share Rights: Detailed rights attached to the preference shares including dividend, voting, and liquidation preferences
11. Covenants: Ongoing obligations of the parties post-completion
12. Events of Default: Circumstances constituting default and consequences
13. Confidentiality: Obligations regarding confidential information
14. Notices: Process and requirements for formal communications between parties
15. General Provisions: Standard boilerplate provisions including governing law, jurisdiction, and entire agreement
1. Anti-Dilution Protection: Protection for investors against future share issuances at lower valuations - include for sophisticated investors
2. Tag-Along Rights: Right of preference shareholders to join in sale of shares by other shareholders - common in VC investments
3. Drag-Along Rights: Right to force minority shareholders to join in sale - include for majority investors
4. Board Appointment Rights: Rights to appoint directors - include for significant investments
5. Information Rights: Rights to receive financial and operational information - important for institutional investors
6. Pre-emptive Rights: Rights to participate in future share issues - common for strategic investors
7. Redemption Rights: Terms for redemption of preference shares - include if shares are redeemable
8. Conversion Rights: Terms for converting preference shares to ordinary shares - include if convertible
9. Exit Rights: Provisions regarding IPO or trade sale - important for VC investments
1. Schedule 1 - Share Certificate Specimen: Form of share certificate to be issued
2. Schedule 2 - Particulars of the Company: Detailed company information including share capital structure
3. Schedule 3 - Conditions Precedent Documents: List of documents required before completion
4. Schedule 4 - Completion Requirements: Detailed list of actions and deliverables required at completion
5. Schedule 5 - Warranties: Detailed warranties given by the Company
6. Schedule 6 - Preference Share Terms: Detailed terms and conditions of the preference shares
7. Schedule 7 - Form of Board Resolutions: Template board resolutions approving the share issuance
8. Schedule 8 - Deed of Adherence: Form of deed for new shareholders to adhere to the agreement
9. Appendix A - Existing Shareholders: List of existing shareholders and their shareholdings
Authors
Relevant legal definitions
Clauses
Relevant Industries
Technology
Financial Services
Real Estate
Manufacturing
Healthcare
E-commerce
Biotechnology
Infrastructure
Renewable Energy
Consumer Goods
Professional Services
Telecommunications
Education Technology
Industrial Technology
Media and Entertainment
Relevant Teams
Legal
Finance
Corporate Development
Compliance
Risk Management
Corporate Secretarial
Treasury
Investment
Board of Directors
Executive Management
Corporate Governance
Mergers & Acquisitions
Relevant Roles
Chief Executive Officer
Chief Financial Officer
Chief Legal Officer
General Counsel
Corporate Secretary
Investment Director
Venture Capital Partner
Private Equity Manager
Corporate Lawyer
Investment Banker
Financial Controller
Compliance Officer
Board Director
Managing Director
Investment Manager
Corporate Development Manager
Legal Counsel
Company Secretary
Finance Director
Risk Manager
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