Set written terms of a stock sale: Stock Purchase Agreement
What we’ll cover
What is a Stock Purchase Agreement?
For both buyers and sellers of corporate stocks, creating a Stock Purchase Agreement is a great way to help protect your rights and obligations. With Stock Purchase Agreements, you can outline the value of each share and set a date for the sale, gaining some assurance that the stock sale will take place and a written record in case there are any questions about the agreement.
A Stock Purchase Agreement (also known as a Stock Sale Agreement or Share Purchase Agreement) explains the terms of a stock purchase between the owner of corporate stock and another party. The stock owner can be the corporation itself or one of the corporation's shareholders. Whether you're the buyer or the seller, having a written Stock Purchase Agreement can help you protect your interests and responsibilities.
Using a Stock Purchase Agreement template, you should include details such as the name of the corporation whose stock is being sold; who is selling the stock; who will be buying the stock; how many shares are being sold and the par value of each share; when and where the closing will occur; and how much "earnest money" the purchaser will deposit before the closing date.
Get started on your own Stock Purchase Agreement now! With Rocket Lawyer, it's as easy as answering a few simple questions.
When to use a Stock Purchase Agreement:
- You are interested in purchasing certain shares of stock in a company and would like to agree on the price and terms of purchase.
- You represent a company and you'd like a written record of the sale of its stocks.
Have questions about your Stock Purchase Agreement?
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- Understand what it says or review it. Use our AI legal assistant to ask questions about your Stock Purchase Agreement, understand what it says, and spot anything that may need a closer look.
- Ask an attorney a question. Connect with an attorney for legal information, with a written answer within one business day or a live consultation.
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Sample Stock Purchase Agreement
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Stock Purchase Agreement
THIS AGREEMENT is made and entered on by and between, ("Seller") of , , and ("Purchaser") of , , , .
WITNESSETH:
Whereas, the Seller is a duly organized Corporation, who is the record owner of outstanding shares of the capital stock of (hereinafter referred to as the "Corporation"), a corporation, which has authority to sell shares of capital stock at par value common stock, and
WHEREAS, the Purchaser desires to purchase said stock and the Seller desires to sell said stock, upon the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and Agreements contained in this Agreement, and in order to consummate the purchase and the sale of the Corporation's Stock aforementioned, it is hereby agreed as follows:
Purchase and Sale
Subject to the terms and conditions hereinafter set forth, at the closing of the transaction contemplated hereby, the Seller shall sell, convey, transfer, and deliver to the Purchaser certificates representing such stock, and the Purchaser shall purchase from the Seller the Corporation's Stock in consideration of the purchase price set forth in this Agreement. The certificates representing the Corporation's Stock shall be duly endorsed for transfer or accompanied by appropriate stock transfer powers duly executed in blank, in either case with signatures guaranteed in the customary fashion, and shall have all the necessary documentary transfer tax stamps affixed thereto at the expense of the Seller.
The closing of the transactions contemplated by this Agreement (the "Closing"), shall be held at located at , , on , at , or such other place, date and time as the parties hereto may otherwise agree.
Amount and Payment of Purchase Price
(a) Consideration
As total consideration for the purchase and sale of the Corporation's Stock, pursuant to this Agreement, the Purchaser shall pay to the Seller the sum of , such total consideration to be referred to in this Agreement as the "Purchase Price".
(b) Payment
The Purchase Price shall be paid as follows:
i. The sum of to be delivered to Seller upon the execution of this Agreement.
ii. The sum of to be delivered to Seller at Closing.
Representations and Warranties of Seller
Seller hereby warrants and represents:
(a) Organization and Standing
The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Commonwealth of State of Commonwealth of
(b) Restrictions on Stock
i. The Seller is not a party to any Agreement, written or oral, creating rights in respect to the Corporation's Stock in any third person or relating to the voting of the Corporation's Stock.
ii. Seller is the lawful owner of the Stock, free and clear of all security interests, liens, encumbrances, equities and other charges.
iii. There are no existing warrants, options, stock purchase agreements, redemption agreements, restrictions of any nature, calls or rights to subscribe of any character relating to the stock, nor are there any securities convertible into such stock.
Representations and Warranties of Seller and Purchaser
Seller and Purchaser hereby represent and warrant that there has been no act or omission by Seller and Purchaser which would give rise to any valid claim against any of the parties hereto for a brokerage commission, finder's fee, or other like payment in connection with the transactions contemplated hereby.
General Provisions
(a) Entire Agreement
This Agreement (including any written amendments hereof executed by the parties) constitutes the entire Agreement and supersedes all prior agreements and understandings, oral and written, between the parties hereto with respect to the subject matter hereof.
(b) Sections and Other Headings
The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.
(c) Governing Law
This Agreement, and all transactions contemplated hereby, shall be governed by, construed and enforced in accordance with the laws of the . In the event that litigation results from or arises out of this Agreement or the performance thereof, the parties agree to reimburse the prevailing party's reasonable attorney's fees, court costs, and all other expenses, whether or not taxable by the court as costs, in addition to any other relief to which the prevailing party may be entitled.
IN WITNESS WHEREOF, this Agreement has been executed by each of the individual parties hereto on the date first above written.
SELLER:
| By: | Date: |
for
PURCHASER:
| By: | Date: |
About Stock Purchase Agreements
Learn about how to set written terms of a stock sale
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What are the common terms in a Stock Purchase Agreement?
With Stock Purchase Agreements, you can outline the value of each share and set a date for the sale, gaining some assurance that the stock sale will take place and a written record in case there are any questions about the agreement.
Here are some of the common terms you may come across when looking into making your own Stock Purchase Agreement for your shareholders:
Authorized shares
The total number of shares "issued" to persons by a corporation cannot exceed the number of shares "authorized" by the Articles of Incorporation. "Authorized" shares refer to the total number of shares that can be sold ("issued"), either upon formation or at a later time. With the number of authorized shares being the maximum, you should decide how many shares to issue to each stockholder. The number of shares issued needs to only be large enough to reflect the desired percentage ownership of the owners. In other words, it is typical not to issue all of the authorized shares.
Classes of stock
Corporations generally authorize more than one class of stock, for example, "common" stock and "preferred" stock, each with different rights and privileges regarding such things as voting and the payment of dividends. However, most simple corporations authorize only one class of stock—common. If the corporation offers more than one type of stock, it is strongly recommended that you consult with an attorney prior to creating the class of stock.
Corporate seal
The Articles of Incorporation or the Bylaws may specify whether the corporation will have a "corporate seal." Many new corporations choose not to have a corporate seal in order to avoid the requirement that such a seal be imprinted on all official corporate documents. For example, the seal can be misplaced, stolen, or inconvenient to obtain when needed. If the corporation does choose to have a corporate seal, it must be imprinted on the stock certificate beneath the officers' signatures.
Fractional shares
It is permissible, but not recommended, to issue fractional shares. For example, if Bob, Ted, and Sarah intend to own the corporation in equal shares, it is permissible to issue 33-1/3 shares to each of them. However, if the corporation has authorized 1,000 shares, it is easier to issue, for example, 100 shares to each of them. Each will own 1/3 of the corporation because each owns 1/3 of the 300 issued shares; the corporation holds the remaining 700 shares.
Number of shares
The number of shares issued to each person should be authorized in advance by a corporate resolution. The resolution should specify who will receive the shares and what the corporation will receive in return, such as cash, property, or past services.
Stock transfer ledger
The corporate secretary is responsible for maintaining a current record of the stockholders. The record is often called a "stock transfer ledger." The ledger includes the name and address of each stockholder, the date and number of new shares issued, and the certificate numbers. If any of the certificates are later transferred to other owners, that information is also recorded, showing the new certificate number and the owner for each transferred certificate.
Transfer of shares
If a current stockholder is transferring his or her shares to another stockholder (in contrast to new shares issued by the corporation), the lower portion of the stock certificate ("Transfer section") should be completed by the selling stockholder. When the new owner's name is inserted, and the transfer is dated and signed, the certificate should be returned to the corporate secretary, who will issue a new certificate and record the transfer in the corporate stock transfer ledger.
In other words, it is not appropriate for the new owner to simply retain the (old) assigned certificate. Instead, the corporation should issue a new certificate. Neither is it appropriate for the corporation to reuse the former certificate number—each time a certificate is prepared, the following sequential number should be used.
Still have questions? Do not hesitate to ask a Legal Pro.
Stock Purchase Agreement FAQs
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How do I make a Stock Purchase Agreement?
It is very simple to prepare a free Stock Purchase Agreement with Rocket Lawyer:
- Make the document - Answer a few general questions and we will do the rest.
- Review it or ask questions - Ask your questions or get your document reviewed instantly with Rocket Copilot or with a real Legal Pro with Rocket Lawyer membership
- Sign it - Sign your Stock Purchase Agreement online and make it legal.
This method is, in most cases, notably less expensive and less time-consuming than meeting and hiring a conventional provider to draft the entire document on your behalf.
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What information is included in a Stock Purchase Agreement?
A Stock Purchase Agreement typically includes information about the parties involved, the number and type of shares being sold, the purchase price per share, any conditions to closing, representations and warranties made by the parties, indemnification provisions, and other relevant terms and conditions.
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Who might find Stock Purchase Agreements useful?
Stock Purchase Agreements are commonly used by individuals, companies, and investors involved in the purchase and sale of stock in a corporation. They may be used in various contexts, including mergers and acquisitions, private placements, and transfers of ownership interests.
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What is the difference between a Stock Purchase Agreement and an Asset Purchase Agreement?
A Stock Purchase Agreement is a less complex transaction involving the purchase and sale of stock in a corporation, where the buyer acquires ownership of part of the company as is, including its assets and liabilities. In contrast, an Asset Purchase Agreement involves the purchase and sale of specific assets and liabilities of a business, rather than the ownership interests in the company itself.
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Are Stock Purchase Agreements confidential?
Stock Purchase Agreements may contain confidentiality provisions that restrict the disclosure of the agreement and its terms to third parties. However, certain information may be disclosed to legal and financial advisors, regulatory authorities, and other parties involved in the transaction.
