A flow through share subscription agreement is a legally binding contract between a company and an investor. In this type of agreement, the investor agrees to purchase shares in the company, and the company agrees to issue these shares as “flow-through shares.”
What are flow-through shares?
Flow-through shares are a type of investment that is unique to the mining and oil and gas industries. These shares allow investors to receive tax deductions for exploration and development expenses incurred by the company.
When a company issues flow-through shares, it can use the funds raised to finance exploration and development projects. The company can then “flow through” the tax deductions associated with these expenses to the investors who purchase the shares.
What is a flow through share subscription agreement?
A flow through share subscription agreement is a contract that outlines the terms and conditions of the purchase of flow-through shares. The agreement includes details such as the number of shares being purchased, the purchase price, and the timing of the issuance of the shares.
The agreement also outlines the terms of the flow-through share agreement, including the expenses that qualify for tax deductions and the time limits for the expenses to be incurred. The agreement must comply with Canadian tax laws, which govern the issuance of flow-through shares.
Why invest in flow-through shares?
There are several reasons why investors may choose to invest in flow-through shares. Firstly, investors can receive tax deductions on their investment, which can lower their overall tax liability. Secondly, investors may benefit from the potential upside of mining or oil and gas exploration and development projects.
However, it`s essential to note that investing in flow-through shares carries risks. Exploration and development projects can be risky, and there is no guarantee that the company will find valuable resources. Furthermore, the tax deductions are subject to certain limitations, and investors may not receive the full deductions they anticipate.
A flow through share subscription agreement is a legal contract between a company and an investor that outlines the terms of the purchase of flow-through shares. These shares allow investors to benefit from tax deductions associated with exploration and development expenses incurred by the company. While investing in flow-through shares can be attractive, it is essential to carefully consider the risks before making an investment.