A stock purchase agreement is an agreement entered into by a seller and a purchaser on a fixed date in order to transfer stocks held by the former to the latter. It should be dated and signed in the presence of witnesses. The name of the corporation of which the stock is being sold and which has a market value should be specified in the agreement. In addition, there is to be agreement as to the intention of the purchaser to buy the stock for a mutually arrived at price governed by covenants and agreements as arrived at within contract.
There must be agreement as to the terms and conditions which are contained within the stock purchase agreement, which at the close of the transaction means that the seller will transfer and deliver to the purchaser all certificates representative of the stock sold and that the purchaser shall pay the mutually agreed price as consideration for the stock being bought. This means that the certificates of the stock being sold shall be duly endorsed for transferring the stock or that stock transfer powers will be duly executed in blank, and in either case the signatures of all the parties will be duly given along with any transfer tax stamps, the cost of which will be borne by the seller.
And, in addition, the place, time and date of the closing of the transaction will be specified by the parties to the agreement. The full consideration as well as the mode of payment will be specified in the agreement.
Furthermore, the seller will warrant that the corporation is of impeccable standing, in valid existence and is properly organized under the laws of the state and has the corporate right to continue with the business to which it is ascribed. Besides this, the seller should be the legal owner of the stocks being
sold and that the seller is not party to any third party being owner of the said stock. The seller warrants that no act, either of commission or omission, shall render the agreement open to a valid claim against it for payments such as brokerage commissions, finder's fee or other related payments connected to the completion of the contract.
The agreement should be complete in all respects and that it supersedes all previous agreements and understandings whether they are written or oral, between the parties to the contract. The agreement shall also be governed by the laws of the state in which the agreement is being entered into. Finally, the agreement shall be signed and witnessed on a given date in order to be legal and fully executed.
To complete the agreement, the consideration or purchase price for the stock being sold shall be the sum of money that is specified as being the final amount that is to be paid to transfer the stock into the hands of the purchaser. The stock purchase agreement shall also specify the mode of payment which may include a sum of money to be paid at the time of execution of the agreement as well as an amount of money to be paid at the closure of the agreement.
Getting all the necessary details regarding the purchase may become very complex and subjective. But, with the availability of professionally made quality documents, it might just be well worth the price to use these pre-drafted documents rather than try and develop one from scratch, which may not meet all legal aspects as required by the conditions of the contract. In any case, drafting a stock purchase agreement for oneself may become more costly and less effective than one that has already had the necessary groundwork done and that will fit the bill more completely.
Author Resource:-
Wade Anderson is a CPA and operates DigitalWorkTools.com.
Click to view a Stock Purchase Agreement
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