- Commercial Contract Drafting, Review & Negotiation
- Master Service & Service Agreements
- Vendor, Supplier & Procurement Agreements
- Consultancy & Independent Contractor Agreements
- Agency, Distribution & Franchise Agreements
- Non-Disclosure & Confidentiality Agreements
- MoUs, Term Sheets & Letters of Intent
- Corporate Structuring & Governance
- Shareholders' Agreements
- Share Purchase Agreements
- Share Subscription & Investment Agreements
- Joint Venture & Strategic Collaboration Agreements
- Partnership & LLP Agreements
- Founders' Agreements
Share Subscription & Investment Agreements
A share subscription agreement records an investor’s commitment to put money into a company in return for newly issued shares. It sets the amount, the price per share, the conditions to be met before the money is paid, the promises the company and founders make, and the steps at closing.
It is usually signed together with a shareholders’ agreement, which governs the investor’s rights after it becomes a shareholder. The issue of shares itself has to follow the private placement and preferential allotment procedure in sections 42 and 62 of the Companies Act, 2013.
When you need it
When raising a funding round
Angel, seed and later rounds are documented with a subscription agreement and a shareholders’ agreement.
When an investor sends the first draft
Investor drafts carry broad warranties and founder obligations. A review separates what is standard from what is not.
When investing in a company
An investor needs warranties, conditions and closing mechanics that protect the money before and after it goes in.
When the investor is outside India
Foreign investment brings pricing, sector and reporting rules that have to be built into the timetable.
When using a convertible instrument
Convertible notes and convertible preference shares defer the valuation, and each has its own legal conditions.
How the process works
Six stages, from the term sheet to the filings after closing. Timings are typical, not promised.
- 1
Term sheet
Depends on the partiesConfirm the valuation, the amount, the instrument, the investor’s rights and any exclusivity. The definitive agreements follow the term sheet closely.
Documents
- The signed or draft term sheet
- The current shareholding (cap table)
- The articles of association
- 2
Due diligence
Commonly two to four weeksThe investor reviews the company’s records, contracts, intellectual property, employment and compliance. Gaps found here become conditions to closing or specific indemnities.
- 3
Draft the agreements
Two to three weeksPrepare the subscription agreement, with the conditions precedent, warranties, indemnities and closing steps, together with the shareholders’ agreement and the amended articles.
- 4
Corporate approvals and valuation
One to two weeks, alongside draftingObtain the valuation report, pass the board and shareholder resolutions, and issue the private placement offer letter to the investor, as the Companies Act requires.
Documents
- A valuation report from a registered valuer
- Board and shareholder resolutions
- 5
Closing
On the closing dateOnce the conditions are met, the investor pays the subscription money into the company’s designated bank account and the board allots the shares.
- 6
Filings after closing
Within the periods the law setsFile the return of allotment with the Registrar of Companies, issue the share certificates or credit the shares, update the registers and, for a foreign investor, report the issue to the Reserve Bank of India.
Common questions
The subscription agreement governs the investment itself, up to closing: price, conditions, warranties. The shareholders’ agreement governs the relationship afterwards: board seats, vetoes, transfers and exit. Some rounds combine the two in one document.
An offer of shares to a select group of identified persons, under section 42 of the Companies Act. The company issues an offer letter in the prescribed form, receives the money through banking channels into a separate account, and allots the shares within sixty days.
Yes, for a preferential allotment by a private company: the price has to be supported by a report from a registered valuer. Where the investor is a non-resident, the price also cannot be below fair value under the foreign exchange rules.
Things that must happen before the investor is obliged to pay: corporate approvals, key employment agreements signed, intellectual property assigned to the company, defects found in due diligence put right and the articles amended.
A return of allotment in Form PAS-3 is filed with the Registrar of Companies within fifteen days of the allotment. An issue of shares to a non-resident is reported in Form FC-GPR within thirty days.
No. Section 56(2)(viib) of the Income-tax Act, which taxed a company on share premium received above fair market value, was withdrawn with effect from 1 April 2025. Valuation rules under company law and foreign exchange law still apply.
Equity shares carry ordinary ownership and voting rights. Compulsorily convertible preference shares carry a preference on a sale or winding up and convert into equity later, at a ratio that can be adjusted. Most institutional investors take the latter.
Related
To discuss an investment round, write to info@ireniclegal.com or call +91 96547 47331. Written by Adv. Kanika Marwaha Bindal; last updated 7 October 2026.