The Preferred Stock Subscription Agreement is a fundamental document in Malaysian corporate finance, used when companies seek to raise capital by issuing preferred shares to investors. This agreement is particularly common in venture capital and private equity transactions, where investors require additional rights and protections beyond those offered to common shareholders. The document must comply with Malaysian regulatory requirements, including the Companies Act 2016, Capital Markets and Services Act 2007, and relevant Securities Commission guidelines. It typically includes detailed provisions on share pricing, investor rights, corporate governance requirements, and conditions precedent to closing. The agreement is essential for both early-stage startups seeking growth capital and established companies looking for expansion funding, as it provides a clear legal framework for the investment relationship while protecting both the company's and investors' interests.
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1. Parties: Identification of the company issuing preferred stock and the investor(s) subscribing to the shares
2. Background: Context of the transaction, including company's current status and purpose of the preferred stock issuance
3. Definitions: Key terms used throughout the agreement
4. Subscription and Issue: Details of the preferred shares being issued, including number, class, and price per share
5. Consideration: Payment terms and method for the preferred shares
6. Closing: Conditions precedent, closing mechanics, and timing
7. Representations and Warranties of the Company: Company's statements about its legal status, authority, and business condition
8. Representations and Warranties of the Investor: Investor's statements about their authority and capacity to invest
9. Preferred Share Rights: Special rights attached to preferred shares including dividend rights, liquidation preference, and conversion rights
10. Covenants: Ongoing obligations of the company and/or investors
11. Events of Default: Circumstances constituting default and consequences
12. Termination: Conditions and process for terminating the agreement
13. Notices: Process for formal communications between parties
14. Governing Law and Jurisdiction: Specification of Malaysian law as governing law and jurisdiction for disputes
15. General Provisions: Standard boilerplate clauses including amendments, assignments, and severability
1. Anti-dilution Protection: Provisions protecting investors from dilution in future funding rounds, included when negotiated by investors
2. Board Representation: Rights of preferred shareholders to appoint directors, included when investors require board seats
3. Information Rights: Specific rights to receive company information and reports, included for sophisticated investors
4. Tag-Along Rights: Rights to join in sale of shares by other shareholders, included for minority investor protection
5. Drag-Along Rights: Rights to force minority shareholders to join in a sale, included when requested by lead investors
6. Pre-emptive Rights: Rights to participate in future share issuances, included when investors want protection against dilution
7. Registration Rights: Rights related to future public offerings, included when IPO is contemplated
1. Schedule 1 - Share Capital Structure: Details of the company's current share capital structure and post-investment cap table
2. Schedule 2 - Particulars of the Company: Detailed corporate information including registration details, directors, and officers
3. Schedule 3 - Terms of Preferred Shares: Detailed terms and conditions attached to the preferred shares
4. Schedule 4 - Warranties: Detailed list of company warranties
5. Schedule 5 - Conditions Precedent: List of conditions to be satisfied before closing
6. Schedule 6 - Closing Deliverables: List of documents and items to be delivered at closing
7. Appendix A - Form of Directors' Resolution: Template for board resolution approving the share issuance
8. Appendix B - Form of Shareholders' Resolution: Template for shareholders' resolution if required
9. Appendix C - Disclosure Letter: Company's disclosures against the warranties
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