Stock Purchase Agreement
- Sale of Stock . The Company hereby agrees to sell to the Founder and the Founder hereby agrees to purchase an aggregate of [ Founder Share s] shares of ...
- Right of Repurchase 2.1. One-hundred percent (100%) of the Shares shall initially be subject to the Company’s Repurchase Option (defined below). ...
- Restrictions on Transfer. ...
- Investment Representations. ...
What does a share sale agreement cover?
Oct 26, 2020 · A stock purchase agreement is an agreement that two parties sign when shares of a company are being bought or sold. These agreements are often used by small corporations who sell stock. Either the company or shareholders in the organization can sell stock to buyers.
What is a shareholder purchase agreement?
The Stock Purchase Agreement ("SPA") is the definitive agreement that finalizes all terms and conditions related to the purchase and sale of the shares of a company. It is different from an Asset Purchase Agreement ("APA") where the assets (not the shares) of a company are being bought/sold. The stock purchase agreement covers the following sections:
What is a partnership buy sell agreement?
A stock purchase agreement is the primary transaction document for a stock acquisition ( PDF available for download at the conclusion of this post ). The purpose of the stock purchase agreement is to confirm the price paid for the securities sought, to control risk to the degree possible and to provide a roadmap for the hold period.
What is a simple purchase agreement?
Jul 01, 2021 · The stock purchase agreement is the central contract between the parties where the business agrees to exchange as specific number of shares of the business venture for the agreed upon funding. The stock purchase agreement is made up of the following elements: Next Article: Company Legal Opinion What is the Preamble? This provision identifies the parties to …
What should I look for in a stock purchase agreement?
Stock Purchase Agreement Name of company. Par value of shares. Name of purchaser. Warranties and representations made by the seller and purchaser.
What is meant by purchase agreement?
A purchase agreement is a type of contract that outlines terms and conditions related to the sale of goods. As a legally binding contract between buyer and seller, the agreements typically relate to buying and selling goods rather than services. They cover transactions for nearly any type of product.
Is a stock purchase agreement the same as an asset purchase agreement?
An asset purchase involves the purchase of the selling company's assets -- including facilities, vehicles, equipment, and stock or inventory. A stock purchase involves the purchase of the selling company's stock only.Jan 17, 2018
Is a stock purchase agreement legally binding?
Stock purchase agreements are legal documents that lay out the terms and conditions for a sale of company stocks. They are legally binding contracts that create obligations and rights for all the parties involved.Jul 5, 2018
Can a seller back out of a purchase agreement?
Once a sales agreement has been signed by both parties, it becomes a legally binding document and a seller who decides to back out of the deal is probably going to end up paying far more than he banked on.Jul 23, 2015
How binding is a purchase agreement?
A purchase agreement is a legal document that is signed by both the buyer and the seller. Once it is signed by both parties, it is a legally binding contract. The seller can only accept the offer by signing the document, not by just providing the goods.Jun 27, 2019
Is there goodwill in a stock purchase?
First, in the case of a stock sale, buyers often pay a premium over the value of the hard assets, which takes the form of goodwill. In a stock sale, the buyer can't obtain a tax benefit from this goodwill.Jun 20, 2016
Is a stock acquisition taxable?
Thus, the costly and complex process of valuing all identifiable assets and liabilities of the target is required for either method. However, for tax purposes, a stock acquisition does not cause a step-up in tax basis; the net assets keep their same basis since the target remains a separate legal entity.Apr 15, 2020
Why would a seller prefer an asset sale?
Potential Liabilities Another significant consideration in determining whether to have an asset sale or stock sale is potential liability. Buyers often prefer asset sales because they can avoid inheriting potential liability that they would inherit through a stock sale.
When would you use a stock purchase agreement?
Stock purchase agreements are important because they put the terms of a sale into writing. This can prevent misunderstandings that may end up in the courtroom. The agreement also allows the seller to show and explain that they are the owner of the stock being sold.Oct 26, 2020
What happens to employees in a stock purchase agreement?
The employees who are employed by the target entity will generally come with the transaction, like a stock purchase. If certain employees at the seller/parent company provide significant services to the target entity, then the transaction will act like an asset purchase with respect to this group of employees.Apr 21, 2021
Who is the seller in a stock purchase agreement?
Generally, stock purchases are more straightforward than asset purchases. The parties sign the Stock Purchase Agreement and related documents that outline the terms of the deal, and the seller(s) transfer the target company's stock to the purchaser. With this the purchaser assumes all the target company's liabilities.May 19, 2021
What is a stock purchase agreement?
A stock purchase agreement is the agreement that two parties (the company or shareholders and buyers) sign when shares of a company are being bought or sold. 7 min read
What is the first section of a stock purchase agreement?
The first section of your stock purchase agreement is often referred to as the preamble. In this section, the agreement will be named, the parties identified, and the date of the contract will be set. In the preamble , you will often see parties referred to as "seller" and "purchaser."
What is a letter of intent?
Indemnification agreement over unforeseen costs. Before an agreement is finalized, a letter of intent (LOI) is created explaining the proposed sale.
What is the right of first refusal clause?
This means other shareholders will have the option to purchase the shares before they're sold to someone else.
What is a stock purchase agreement?
What Does Stock Purchase Agreement (SPA) Mean? 1 Interpretation - provides the definitions for all the major terms used in the overall body of the agreement; 2 Purchase and sale of stock - itemizes the purchase price, any purchase price adjustments, the purchase price allocation for tax purposes between the seller and the buyer, and dispute resolution mechanisms; 3 Representations and warranties of the seller and buyer - provides all the statements that the seller and buyer are signing off to be true; 4 Matters related to employees - provides terms on how employee benefits and any accrued bonuses are to be handled post transaction; 5 Indemnifications - provides details on all indemnifications to be provided by either the seller or buyer to each other for any costs that may arise post transaction resulting from conditions that existed prior to the deal closing; 6 and Tax matters - specifies any special tax treatment that either the seller or the buyer may be entitled to.
What is SPA in stock?
The Stock Purchase Agreement ("SPA") is the definitive agreement that finalizes all terms and conditions related to the purchase and sale of the shares of a company. It is different from an Asset Purchase Agreement ("APA") where the assets (not the shares) of a company are being bought/sold.
What is The Action Section?
Note: In this case the value being exchange will be a class of preferred shares in exchange for a predetermined amount.
What are the Representations and Warranties?
The representations and warranties state the facts about the business venture that are true and will remain true at the time of closing.
What are the Covenants?
This section contains the duties that each party must undertake as part of the agreement.
What are the Conditions?
These are generally tied to the covenants and outline factual elements that must be true prior to closing.
What are the Endgame Provisions?
These are the provisions that outline the rights and responsibilities in the event of failure of any representation, warranty, covenant, and condition.
What is a stock purchase agreement?
A stock purchase agreement is between a buyer seeking to buy shares of a company for a set price from a seller. The agreement details the number (#) of shares, price ($) per share, and date of the sale. Any other terms are to be negotiated between the parties and after signature, the exchange of funds for the shares usually occurs ...
What is the difference between an asset purchase agreement and a stock purchase agreement?
The main difference with an asset purchase agreement is the buyer is not obtaining the liabilities of the seller. Whereas, in a stock purchase the buyer is obtaining all obligations of the company in addition to its assets.
What is SPA in stock?
A stock purchase agreement, or ‘ SPA ‘, allows someone to buy ownership of a business entity. The purchase can be either in shares of stock or as a percentage. For private entities, the buyer requires to have a due diligence period. For public companies, the buyer is protected under the Securities Act of 1933 and the transaction may occur ...
What happens after a letter of intent is signed?
After a letter of intent is signed, the buyer will have the right to obtain all necessary contracts, agreements, and financial reports of the company. This is known as the “due diligence period” to ensure that the seller is not misrepresenting any aspect of the business.
What happens after due diligence?
After the due diligence period, the stock purchase agreement is to be written (see How to Write) and signed amongst the parties. Once signed, the closing should occur immediately with the funds exchanged for the stock certificates.
What is an asset purchase?
Asset Purchase. In doing an asset sale, the seller remains as the legal owner of the entity, while the buyer purchases individual assets of the company, such as equipment, licenses, goodwill.
What is asset acquisition?
Asset Acquisition An asset acquisition is the purchase of a company by buying its assets instead of its stock. It also involves an assumption of certain liabilities. or a purchase and sale of common stock. Stock Acquisition In a stock acquisition, the individual shareholder (s) sell their interest in the company to a buyer.
How long does goodwill amortize?
With an asset transaction, goodwill, which is the amount paid for a company over and above the value of its tangible assets, can be amortized on a straight-line basis over 15 years for tax purposes. In a stock deal, with the acquirer buying shares of the target, goodwill cannot be deducted until the stock is later sold by the buyer.
What is an asset deal?
Asset Deal An asset deal occurs when a buyer is interested in purchasing the operating assets of a business instead of stock shares. It is a type of M&A transaction. In terms of legalese, an asset deal is any transfer of a business that is not in the form of a share acquisition. is favored, a variety of issues must be considered, ...
Is a stock purchase an asset purchase?
Stock Purchase. A stock purchase is simpler in concept than an asset purchase. Therefore, in most instances, it’s just basically an easier, less complex transaction. The Acquirer buys the stock of the target and takes the target as it finds it, in regard to both assets and liabilities.
What are the advantages of buying assets?
Here are several advantages of an asset purchase transaction: A major tax advantage is that the buyer can “step up” the basis of many assets over their current tax values and obtain tax deductions for depreciation and/or amortization. With an asset transaction, goodwill, which is the amount paid for a company over and above the value ...
What are the disadvantages of asset purchases?
Here are several disadvantages of an asset purchase as compared to a stock purchase: Contracts – especially with customers and suppliers – may need to be renegotiated and/or renovated by the new owner. The tax cost to the seller is typically higher, so the seller may insist on receiving a higher purchase price.
What is restricted stock purchase agreement?
A restricted stock purchase agreement is a type of written agreement that places restrictions on the stockholder’s rights with respect to the shares being issued. The restrictions generally restrict selling, transferring, etc. of the shares and grant a series of rights in favor of the Company to buyback shares, exercise a right of first refusal, ...
What is a right to repurchase?
Right to Repurchase. An RSPA will typically allow the Company to buyback shares from the founder through a repurchase option. The repurchase option can be triggered by a number of events, including the founder being fired or force to quit. Single / Double Trigger Acceleration.
