Share Subscription vs Purchase Agreements: A Definitive Guide 

One question we often get when assisting clients with investment deals, exits, and restructuring is whether they need a Share Subscription or Purchase Agreement. 

While both agreements deal with shares, they serve different purposes and are subsequently used in different scenarios. 

Share Subscription Agreement 

When a company issues new shares and sells them directly to an investor, a Share Subscription Agreement (SSA) is used to set out the:  

• number and class of new shares 
• subscription price and payment terms 
• conditions precedent, and 
• rights of the incoming investor (especially if preference shares are involved) 

Typical use cases include fundraising rounds, capital injection by existing shareholders, onboarding a strategic partner, or the formation of joint ventures. 

The end result is that a company receives fresh capital, an investor becomes a new shareholder, and the SSA keeps both parties aligned and happy. 

Share Purchase Agreement 

A Share Purchase Agreement (SPA) is used when an existing shareholder sells their shares to another party and needs a document to set out the: 

• sale and transfer of existing shares 
• purchase price and closing conditions 
• warranties and indemnities by the seller, and 
• post-completion covenants (if any) 

SPAs are used during the sale of a founder’s stake, buyouts, share transfers, and most times where share ownership changes but the company’s share capital remains. 

Side-by-side comparison 

Final thoughts 

Whether you are onboarding a new investor, transferring equity, or exiting a business, the right agreement ensures clarity, compliance, and alignment of expectations.  

If you are planning a share transaction, we recommend ensuring that your documentation accurately reflects the nature of the deal.