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Subscription Agreement

November 1, 2021 • 2 min read

A subscription agreement is a legal document that is signed by all investors who purchased a portion of a Special Purpose Vehicle (SPV). The agreement represents the SPV that has been created by an offering, and in most instances, each of the investors will own a pro-rata portion of the SPV.

In the fast-moving economy of startups and small businesses, subscription agreements are commonly used for startup investors, angel investors, or crowdfunding opportunities like those available on Yieldstreet.

A subscription agreement will contain the necessary information regarding shares and capital contributions from individual investors. The agreement can be used to protect an owners’ legal rights if disputes had to arise between the involved parties.

What’s included in a subscription agreement?

The Subscription Agreement Governance allows the use of these agreements for new and small businesses who require funding and investment from various parties. The Governance of this agreement relies heavily on SEC Rule 506(b) and 506(c) of Regulation D.

Under these conditions, important parts of the subscription should include, share ownership, director resolution, outstanding shares, non-compete and confidentiality clauses, and indemnity clauses. These are among some of the most important parts new business owners should always include in their newly drafted subscription agreements.

What are the advantages of a subscription agreement?

Limited Liability and Partnership for investors.
New investors can act as silent partners in the business or company.
Investors will only need to complete a once-off payment of investment.
This agreement has become an easier way to sell stock on the public market, sidestepping registration with the Securities and Exchange Commission (SEC).

Overall, subscription agreements have become a popular way for new and small businesses to find public investors. This allows them to potentially receive better financial backing while limiting the potential financial liability of their investors.

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¹ Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in significant losses.

² Represents an net annualized return, using an internal rate of return (IRR) methodology, with respect to the matured investments shown in your Portfolio experience, utilizing the effective dates and amounts of subscriptions and distributions to and from the investments, net of management fees and all other expenses charged to the investments.[read more]

³ "Annual interest," "Annualized Return" or "Target Returns" represents a projected annual target rate of interest or annualized target return, and not returns or interest actually obtained by fund investors. “Term" represents the estimated term of the investment; the term of the fund is generally at the discretion of the fund’s manager, and may exceed the estimated term by a significant amount of time. Unless otherwise specified on the fund's offering page, target interest or returns are based on an analysis performed by Yieldstreet of the potential inflows and outflows related to the transactions in which the strategy or fund has engaged and/or is anticipated to engage in over the estimated term of the fund. There is no guarantee that targeted interest or returns will be realized or achieved or that an investment will be successful. Actual performance may deviate from these expectations materially, including due to market or economic factors, portfolio management decisions, modelling error, or other reasons.

⁴ Reflects the annualized distribution rate that is calculated by taking the most recent quarterly distribution approved by the Fund's Board of Directors and dividing it by prior quarter-end NAV and annualizing it. The Fund’s distribution may exceed its earnings. Therefore, a portion of the Fund’s distribution may be a return of the money you originally invested and represent a return of capital to you for tax purposes.

⁵ Represents the sum of the interest accrued in the statement period plus the interest paid in the statement period.

⁶ The internal rate of return ("IRR") represents an average net realized IRR with respect to all matured investments, excluding our Short Term Notes program, weighted by the investment size of each individual investment, made by private investment vehicles managed by YieldStreet Management, LLC from July 1, 2015 through and including July 18th, 2022, after deduction of management fees and all other expenses charged to investments.

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⁹ Statistics as of the most recent month end.

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