Provided by: Jennifer Kirschenbaum, Esq.
May 4, 2023
I’m being given an opportunity to invest in a company. I have the subscription documents I’d like you to review can you also let me know what the biggest flags are going to be?
Thanks, Dr. K
Congratulations on the opportunity. Happy to review and glad to hear they are organized enough to have subscription documents.There are plenty of times target companies will not have proper paperwork to present, so, already a step in the right direction!
In addition to the subscription document, which is just a document joining you to a company, there should also be a shareholders or operating agreement that you can send along for review. That document will detail, how you’re buying how much you’re buying how, what control you will have, including whether you will have voting rights, your right to access books and records, and how you can potentially be removed. In addition to the legal process of joining and your rights, a key area of inquiry includes whether the financials of the company justify the investment, which we recommend you tackle with your financial advisor and//or accountant. Basic financial questions your advisors may want answer include, but are not limited to, requesting for tax returns for the company, break down of revenue, debt and expenses, cash on hand and schedule of distributions.
Happy to dive deeper once in receipt, and hope the above is helpful!