What the agreement typically does
A securities purchase or subscription agreement records the sale of stock, convertible notes, warrants, or similar instruments, and it usually contains representations by the company about its business and by the investor about its status and intentions. Most private placements rely on an exemption from SEC registration, and investor representations help establish that the exemption applies. Securities sold this way are generally restricted, which limits resale until a registration or another exemption is available. Investor rights such as information rights, preemptive rights, and registration rights may sit in the same document or in companion agreements. Federal and state anti-fraud rules apply even when the offering is exempt from registration, which is why the accuracy of disclosures matters. If your document is a security agreement granting a lender collateral, that is a different instrument with its own issues.
Records to keep straight
Companies should keep the cap table before and after the closing, board approvals, any offering materials given to investors, and copies of required federal and state notice filings. Investors should retain the executed agreement, the disclosure schedules, the company's charter and any investor rights agreement, and the certificates or electronic records showing their holdings. Emails and presentations given during the raise can become important if the company's representations are questioned later. Side arrangements with particular investors should be documented and checked against the main agreement. Wire confirmations and closing receipts settle many disputes about when securities were actually issued.
Issues we review first
For a company, we look at whether the offering fits an exemption, whether the disclosures are accurate and complete, and whether the terms fit the cap table and future financing plans. For an investor, the focus is on the economic terms, protective provisions, transfer limits, and what remedies exist if a representation proves untrue. Disputes often concern conversion mechanics, anti-dilution adjustments, and whether a closing condition was satisfied. We also consider how state law and the company's charter interact with the agreement. From there we decide whether the job is drafting, negotiating changes, or addressing a claim.
