Representations and warranties of subscriber: Overview, definition, and example
What are representations and warranties of a subscriber?
Representations and warranties of a subscriber are the statements and assurances a subscriber makes when entering into an agreement, typically in investment or subscription contracts. These statements confirm that the subscriber meets the necessary qualifications and understands the terms of the agreement.
For example, in a private investment deal, an individual subscribing to shares may have to confirm that they are an accredited investor and that they are not relying on false information to make their investment.
Why are representations and warranties of a subscriber important?
These representations and warranties help protect the company or issuer by ensuring that subscribers meet legal and financial requirements before they enter into an agreement. They also reduce the risk of disputes by making subscribers acknowledge their obligations and responsibilities upfront.
For businesses, particularly those issuing securities, these assurances help maintain regulatory compliance and prevent fraud or misrepresentation.
Understanding representations and warranties of a subscriber through an example
A company offers private shares to investors and requires each subscriber to confirm that they are an accredited investor with sufficient financial knowledge to assess the risks. One subscriber signs the agreement, falsely claiming to be accredited. If the investment fails, the company can use the representations and warranties clause to protect itself from liability, arguing that the subscriber misrepresented their qualifications.
In another scenario, a SaaS company offers a subscription-based service with a contract requiring the subscriber to confirm that they are authorized to enter the agreement on behalf of their business. If a subscriber later claims they lacked the authority, the company can refer to the clause to enforce the agreement.
An example of a representations and warranties of subscriber clause
Here’s how a representations and warranties clause might appear in a contract:
“The Subscriber represents and warrants that they have the full legal authority to enter into this Agreement and that all information provided is accurate and complete. The Subscriber further acknowledges that they have conducted their own due diligence and are not relying on any representations outside of this Agreement.”
Conclusion
Representations and warranties of a subscriber help protect businesses by ensuring that subscribers meet necessary legal and financial requirements before entering into an agreement. These assurances minimize risk, support compliance, and clarify the subscriber’s obligations.
For SMBs, including clear representations and warranties clauses in contracts can help prevent disputes, reduce liability, and create a stronger legal foundation for agreements.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.