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Subscription Agreement
I need a subscription agreement for a software service that includes a 12-month term with automatic renewal, clear terms on data privacy and security, and a provision for early termination with a 30-day notice period. The agreement should also outline the payment schedule and any applicable discounts for annual prepayment.
What is a Subscription Agreement?
A Subscription Agreement sets out the terms when investors buy shares or units in a Qatari company or investment fund. It's essentially your formal commitment to purchase a specific number of shares at an agreed price, while accepting the company's rules and obligations.
Under Qatar Financial Centre regulations, these agreements protect both parties by clearly spelling out key details like payment terms, investor rights, and any restrictions on selling shares. They're particularly important for private placements and closed-ended funds, where the Qatar Financial Markets Authority requires detailed documentation of all investment terms and conditions.
When should you use a Subscription Agreement?
Use a Subscription Agreement when raising capital for your Qatari business through share offerings or investment fund units. This becomes essential during private placements, startup funding rounds, or launching investment funds where you need to formalize commitments from investors.
The Qatar Financial Centre requires these agreements for any regulated investment activity, particularly when dealing with qualified investors. They're critical for documenting investment terms, ensuring compliance with QFC rules, and protecting both parties' interests. Small businesses often need them when accepting angel investment, while larger companies use them for private equity deals or venture capital funding.
What are the different types of Subscription Agreement?
- Basic Share Subscription Agreement: Standard form used for straightforward equity investments in Qatari private companies, covering essential terms and payment schedules.
- Investment Fund Subscription Agreement: Specialized version for QFC-regulated investment funds, including detailed investor qualification criteria and fund-specific terms.
- Convertible Note Subscription Agreement: Used for early-stage funding where investment converts to equity later, common in Qatari tech startups.
- Series Funding Subscription Agreement: Complex version for institutional investors, including preferred share rights and specific QFC compliance requirements.
Who should typically use a Subscription Agreement?
- Company Directors: Authorize and approve the terms of share offerings, ensuring compliance with QFC regulations and company bylaws.
- Investors: Review and sign agreements when purchasing shares or fund units, committing to specific investment terms and conditions.
- Legal Counsel: Draft and review agreements to ensure they meet Qatari legal requirements and protect all parties' interests.
- Investment Fund Managers: Structure subscription terms and oversee the documentation process for fund investments.
- Corporate Secretaries: Handle documentation, maintain shareholder records, and process share certificates following subscriptions.
How do you write a Subscription Agreement?
- Company Details: Gather full legal name, registration number, and QFC license details of the issuing entity.
- Investment Terms: Define share class, price per share, total investment amount, and payment schedule.
- Investor Information: Collect investor's legal name, QID/passport details, and proof of qualified investor status under QFC rules.
- Rights Package: Outline voting rights, dividend rights, and any transfer restrictions.
- Compliance Checks: Verify alignment with Qatar's foreign ownership limits and QFC investment regulations.
- Documentation: Prepare corporate resolutions authorizing the share issuance and required regulatory filings.
What should be included in a Subscription Agreement?
- Parties Section: Full legal names and details of the company and subscriber, including QID/registration numbers.
- Investment Details: Precise description of shares/units, price, payment terms, and subscription amount.
- Representations: Subscriber's confirmation of qualified investor status under QFC regulations.
- Rights and Restrictions: Clear outline of voting rights, dividend entitlements, and transfer limitations.
- Governing Law: Explicit statement of Qatar law application and QFC jurisdiction.
- Execution Block: Designated spaces for authorized signatures, dates, and company seal.
- Compliance Statements: References to relevant QFC rules and foreign ownership restrictions.
What's the difference between a Subscription Agreement and a Bond Purchase Agreement?
A Subscription Agreement differs significantly from a Bond Purchase Agreement in Qatar's financial markets. While both involve investment commitments, they serve distinct purposes and carry different legal implications under QFC regulations.
- Ownership Structure: Subscription Agreements convey equity ownership and voting rights in a company, while Bond Purchase Agreements represent debt instruments with fixed repayment terms.
- Duration and Rights: Bonds have predetermined maturity dates and interest payments, whereas share subscriptions represent permanent ownership until sold.
- Regulatory Framework: Share subscriptions fall under QFC's company law and equity regulations, while bonds must comply with Qatar's debt market rules and QFMA requirements.
- Risk Profile: Shareholders face higher risk but potential unlimited upside, whereas bondholders have priority in payment but limited returns.
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