shares

What is a partly-paid share?

It is common to hear people talk about owning shares or equity in a company but what does that actually mean?  Simply put, a share (sometimes referred to as equity in investment settings) is a portion of ownership of a company.  By acquiring shares in a company, the person becomes a member (commonly referred to as a ‘shareholder’) of the company, thereby granting them benefits and rights associated with the class of share that they subscribe for.  These rights can include the right to vote on issues relating to the company and to a distribution of profits (commonly referred to as dividends).  Generally, when people subscribe for shares, they pay the full price of the share upfront, however, it is possible to receive a share without paying the full purchase price – these shares are known as partly-paid shares. [Read more…]

What is a Share Subscription Agreement?

A share subscription agreement (Share Subscription Agreement) is a promise by a potential shareholder, also known as a subscriber, to make payment of funds to a company (Company) in an agreed number of “tranches”, in return for the Company issuing and allotting a certain number of shares at a certain price, such that the subscriber becomes a shareholder (Shareholder).  A Share Subscription Agreement must include the number of shares that will be issued to the Shareholder, and the order and timing by which funds will be advanced.  Sometimes it seems that a Share Subscription Agreement merely sets out the provisions of a term sheet (Term Sheet) in a fuller and more precise manner.  [Read more…]

What is a Preference Share?

Preference shares (Preference Shares) are a class of share that gives the holders some right or preference over another class of shares.  A Preference Share is often thought of as a ‘hybrid’ security, as it has features of both debt and equity.  Like ordinary shares, Preference Shares are issued by a company at the time of issue, or may be capable of being purchased on the market.  Pursuant to section 254A(2) of the Corporations Act 2001 (Cth), a company can only issue Preference Shares if the rights which attach to such shares are set out in the company’s constitution, or have been approved by a special resolution of the company.  A company does not have to be listed on a stock exchange to issue preference shares. [Read more…]

Share vesting agreements – could compulsory acquisition be a penalty?

In the Australian start-up community, we appear to have adopted most of the terminology from the United States, notwithstanding that the laws in relation to shares, options, loans (Securities) are completely different.   One such “imported term” is the “Vesting Schedule” which is commonly utilised in a Share Vesting Agreement.   The principle is simple enough, individuals contribute to a start-up (Startup) work to build a product or service and are given equity in the business (Company) in exchange for their efforts (Sweat for Equity Deal).  A Share Vesting Agreement will usually contains a Vesting Schedule which describes the rights and obligations of the participants by which their Securities vest, or are cancelled if the person fails to achieve certain milestones.  Whilst Securities is a broader term, generally in the case of start-ups we refer to various classes of shares in a proprietary limited company incorporated under Australian law.

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