A private placement memorandum (PPM) and a subscription agreement are two important documents used in the process of raising capital. While the PPM addresses the details of the offer, the subscription agreement acts as the purchase agreement to acquire shares in the offering. A private placement is the sale of shares to a limited number of accredited investors who meet specific criteria. A PPM is a document created to sell investments in securities (usually stocks and bonds) to private investors.
It is used to help investors understand the security or investment instrument and follows the securities laws recommended by the Securities and Exchange Commission (SEC).The subscription agreement is a binding legal contract between the issuing corporation and the investor. It transfers the company's values to investors and protects the issuer from private placement of all kinds of liabilities and contingencies. In an LP, a general partner manages the partnership entity and hires limited partners through a subscription agreement. When issuing a private placement offer, it is important to know the regulations before preparing the PPM. This document usually refers to other basic offering documents, such as the private placement memorandum, shareholders or operating agreement, which the investor may need to consult for more information about the securities offering. Private equity firms often use private placements to accelerate their growth without going into debt or going public.
Manufacturing companies also use PPMs to raise capital to expand their number of units and manufacturing plants.
