In a private placement offering, a company seeks to raise funds in the private capital market. The heart of every private placement offering is the subscription agreement. The subscription agreement describes the type of offering (raising debt or selling equity), how many shares are being offered and the conditions to which the investor must adhere.

No Regulatory Oversight
Contrary to popular belief, the U.S. Securities and Exchange Commission (SEC) does not regulate the content of a subscription agreement. However, a company that is raising capital must provide investors with information that is free from false or misleading statements. Similarly, a company should not exclude any information if the omission makes what is provided to investors false or misleading.

Description
Subscription agreements describe the amount of stock being sold or the terms of the loan, the proposed share offering price and the qualifications necessary for investors in the company. Subscription agreements also provide information to the investor about the minimum investment amount and how many shares that minimum investment represents.

Escrow Rules
The SEC is very specific about the required treatment of an escrow account maintained in an "all or none" or "best efforts" offering. The subscription agreement for an "all or none" or "best efforts" offering indicates that money paid to buy securities must be returned to the investors if the specified number or dollar amount of securities is not sold within a specified time.