The stock purchase agreement is used to sell a particular number of shares at a predetermined price. However, it is advisable to use such documents every time a corporation or an individual is selling or purchasing shares to save themselves from any kind of fraud or chaos.
The agreement can further be used if one of the partners, owning the company’s shares, wishes to withdraw his shares. Before jumping into a stock purchase agreement, let’s understand what exactly it is first.
What Is a Stock Purchase Agreement?
A stock purchase agreement is also known as a share purchase agreement. It is a legally bound agreement between a company or the shareholders of the company who is willing to sell its shares and the stock buyers to transfer the ownership of the shares.
The shares are the unit of ownership in the company which is divided and owned by shareholders. Moreover, the shares determine the percentage of ownership in the company which in turn decides the dividend payment of the shareholders.
With the stock purchase agreement, the rights of both the parties regarding the shares transaction are protected. Stocks and shares are offered in the open market to raise money for the organization.
Small organizations offer their stock as an employee benefit or founders of the company may hold shares of stocks. However, this agreement states the price per share and the number of shares purchased.
Who Needs a Stock Purchase Agreement?
The owner or the partners of the company shall use a stock purchase agreement to extend the parts of the ownership in the company. This helps them to raise money to carry out their further plans for the organizations.
If there is only one owner or employee of the company, this is not something he is planning to do. However, to expand the company, launching shares could be of great help. For transfer of 100% shares in a business to a buyer, it is advisable to use a stock purchase agreement.
The following are the reasons why one shall create share purchase agreement:
- To accumulate funds for the company for its growth and expansion.
- To make your company more attractive to highly skilled talents, offer the shares as an incentive.
What Is Included in a Stock Purchase Agreement?
In consideration with mutual agreement between the parties, the seller and buyer of the shares agree to the following terms:
Purchase And Sale
With the mention of the purchaser and seller’s name, it is stated that the purchaser agrees to purchase and the seller agrees to sell the shares of the company’s stock.
The agreement shall convey the number of shares being purchased at what per share rate.
After the agreement comes into effect, the seller shall process the transfer of the shares to the purchaser. The date until which the shares shall be delivered to the purchaser is mentioned in the agreement.
The seller shall agree to terms of the company like formed and good standing under the laws. No investigation or claim is pending. The sole owner and the seller hold marketable and valid titles to the shares. Also, the seller has the right to enter into the terms of the agreement.
However, some more terms could be added as per the requirement and position of the company. For that you can refer to stock purchase agreements.
Terms of Modification
It shall be stated in the agreement that no modification of the agreement shall be considered valid unless presented in written and agreed by both the parties.
The interpretation of the terms shall be governed by and in accordance with the state laws. Both parties shall sign the agreement in acknowledgment that they have provided the duly information and agreed to the terms and conditions as of the day and year set forth below.
With the stock purchase agreement, both the parties determine all of the warranties and provisions of the sale. It also helps with any dispute resolution in the future for the protection of the company.
However, without a written stock agreement template, the terms and conditions shall not be governed legally. So, it is crucial to sell shares prudently with this agreement.
Furthermore, any party can create their template by referring to a stock purchase agreement sample from CocoSign. We provide great templates for stock purchase agreements and other agreements that are created by experts as per the latest laws.