Updated August 04, 2022
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 as soon as possible.
Types of Stock (6)
- Corporations;
- Limited Liability Companies (LLCs);
- Partnerships;
- General Partnerships;
- Limited Partnerships; and
- Trusts.
Table of Contents |
What is a Stock Purchase Agreement?
A stock purchase agreement, or ‘SPA‘, allows someone to buy ownership of an entity through its shares of stock (corporation) or as a percentage (%) of the business (LLC). 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 immediately.
Video
What to Include?
- Buyer’s Name;
- Seller’s Name;
- Description of Shares;
- Purchase Price;
- Closing Date; and
- Due Diligence Period (if any).
Classes of Stock
Classes of stock commonly have different voting rights allowing a group of individuals make the primary decisions of the company.
For example, ABC Company has three (3) different classes of stock:
- Class A Stock: Allows 3 votes per share.
- Class B Stock: Allows 2 votes per share.
- Class C Stock: Allows 1 vote per share.
How to Purchase Stock (Privately)
Purchasing stock can be completed by agreement or online depending on whether the company is publicly traded for not. For private companies, a physical stock certificate is commonly transferred and obtained by the buyer from the seller.
Step 1 – Negotiate or Place a Bid
Sign a stock purchase letter of intent or place a bid for a stock on a per-share basis. This starts the negotiating process and allows the seller of the stock to determine whether or not they would like to sell their shares.
Step 2 – Obtain Company Documents
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.
Step 3 – Sign a Stock Purchase Agreement
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. At this time the transaction is closed with the buyer being the official new owner of the stock.
Asset Purchase vs Stock Purchase
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.
Sample
STOCK (SHARES) PURCHASE AGREEMENT
I. THE PARTIES. This Stock (Shares) Purchase Agreement (“Agreement”) is dated as of [DATE], and is made and entered into by and between:
Buyer: [BUYER’S NAME] with a mailing address of [MAILING ADDRESS] (“Buyer”), and
Seller: [SELLER’S NAME] with a mailing address of [MAILING ADDRESS] (“Seller”).
Buyer and Seller are each referred to herein as a “Party” and, collectively, as the “Parties.”
II. ENTITY.
Entity Name: [ENTITY NAME]
Entity Mailing Address: [MAILING ADDRESS]
State of Incorporation / Organization: [STATE]
Entity Type: (check one)
☐ – Corporation
☐ – LLC (Company)
☐ – Partnership
☐ – General Partnership (GP)
☐ – Limited Partnership (LP)
☐ – Other. [OTHER]
Hereinafter known as the “Business Entity.”
III. SHARES. The Buyer agrees to buy and the Seller agrees to sell the following Business Entity:
Number (#) or Percent (%) of Shares: [# OR %]
Class / Series: [CLASS]
Hereinafter known as the “Shares.”
IV. PURCHASE PRICE. The Buyer agrees to purchase the Shares for $[AMOUNT] (“Purchase Price”) from the Seller. The Purchase Price shall be paid to the Seller on the Closing Date.
V. CLOSING DATE. The closing shall occur on or before [DATE] (“Closing Date”) at a time and location agreeable by the Parties.
VI. PAYMENT METHODS. On the Closing Date, the Buyer shall deliver the full amount of the Purchase Price in any of the following methods: (check all that apply)
☐ – Bank Wire
☐ – Cash
☐ – Cashier’s Check
☐ – Other: [OTHER]
VII. DEPOSIT. As part of this Agreement, the Seller: (check one)
☐ – Requires a Deposit. The Seller requires an initial payment in the amount of $[AMOUNT] (“Deposit”). The Deposit must be paid within [#] Calendar Days from the Effective Date of this Agreement.
☐ – Does not require a Deposit. The Buyer’s consideration shall be their full-faith commitment to purchase the Shares of Stock under the terms of this Agreement.
VIII. DUE DILIGENCE PERIOD. The Buyer: (check one)
☐ – Requires a Due Diligence Period. The Buyer requires a due diligence period to inspect the finances and agreements of the Business Entity. The decision as to whether the Shares of Stock is suitable for its intended purposes shall be the sole decision of Buyer, determined in the absolute discretion of Buyer, with Buyer’s decision being final and binding upon the Parties. Buyer shall have until [DATE], at [TIME] ☐ AM ☐ PM to notify Seller of its termination of this Agreement (“Inspection Period”). If the Buyer decides to terminate this Agreement during the Inspection Period, any Deposit made shall be returned to the Buyer.
☐ – Does NOT Require a Due Diligence Period. The Buyer does not require a due diligence period to review the finances, agreements, or any other information of the Business Entity.
IX. DELIVERY. The delivery of the Shares of Stock, along with any stock certificates, shall be transferred to the Buyer at Closing Date upon the funds being received by the Seller in an approved method.
X. AUTHORITY OF SELLER. To induce the Buyer to enter into and perform its obligations under this Agreement, the Seller hereby represents and warrants to Buyer, and covenants with Buyer, as follows:
a.) Capacity. The Seller has all requisite power, authority, and capacity to enter into this Agreement. The execution, delivery, and performance of this Agreement by the Seller does not, and the consummation of the transaction contemplated hereby will not result in a breach of or default under any agreement to which the Seller is a party by which the Seller is bound.
b.) Binding Agreement. This Agreement has been duly and validly executed and delivered by the Seller and constitutes the Seller’s valid and binding agreement, enforceable against the Seller in accordance with and subject to its terms.
c.) Title to Shares of Stock. The Seller is the lawful, record and beneficial owner of all the Shares of Stock, free and clear of any liens, claims, agreements, charges, security interests and encumbrances whatsoever. The sale, conveyance, assignment, and transfer of the Shares of Stock in accordance with the terms of this Agreement transfers to the Buyer legal and valid title to the Shares, free and clear of all liens, security interests, hypothecations or pledges.
XI. AUTHORITY OF BUYER. To induce the Seller to enter into and perform their obligations under this Agreement, the Buyer represents and warrants to the Seller as follows:
a.) Capacity. The Buyer has all requisite power, authority, and capacity to enter into this Agreement. The execution, delivery, and performance of this Agreement by the Buyer does not, and the consummation of the transaction contemplated hereby will not result in a breach of or a default under any agreement to which the Buyer is a party or by which Buyer is bound.
b.) Disclosure. The Buyer is aware of the risks involved in purchasing the Shares of Stock and accepts that its value can change rapidly and unpredictably.
XII. DATE AND TIME. Time is of the essence.
a.) Calendar Days. Calendar days shall represent all days of the year except Saturdays, Sundays, and Federal Holidays (“Calendar Days”).
b.) Effective Date. The effective date of this Agreement shall be the day the Parties authorize this Agreement and acceptance has been given.
XIII. GOVERNING LAW. This Agreement shall be construed, interpreted, and enforced in accordance with, and shall be governed by, the laws in the State of [STATE] without reference to, and regardless of, any applicable choice or conflicts of laws principals.
XIV. COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the several parties hereto in separate counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same Agreement.
XV. ADDITIONAL TERMS & CONDITIONS. [ADDITIONAL TERMS]
XVI. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding and agreement of the Parties relating to the subject matter hereof and supersedes any and all prior understandings, agreements, negotiations and discussions, both written and oral, between the Parties hereto with respect to the subject matter hereof.
Buyer’s Signature: _____________________________ Date: _________________
Print Name: _____________________________
Seller’s Signature: _____________________________ Date: _________________
Print Name: _____________________________
How to Write
Download: Adobe PDF, MS Word, OpenDocument
I. The Parties
(1) Date Of Stock Purchase Effect. This paperwork requires a distinct start date to the obligations it will place on its Participants. Furnish the date when this effect begins in Section I.
(2) Buyer Identity And Address. The Stock Buyer must be defined in the First Article. His or her full name (as it appears in government paperwork) should be submitted to the first “Buyer” line presented while a reliable mailing address where he or she can be formally contacted regarding this agreement and the concerned stock purchase should be dispensed to the empty space that follows. Be advised that in a case where the Stock Buyer is a Business, then its entire registered name must be produced in this section (along with its office or mailing address).
(3) Seller Name And Address. The Seller of the stocks must be named in the “Seller” section on display in Section I. If the Seller of the shares discussed in this document is a Business, its legal name as registered with its State of formation or organization should be presented with (if applicable) its suffix of status. It will also be necessary to present the legal mailing address of the Stock Seller in this section as requested by the second space in this area.
II. Entity
(4) Entity Name. It is imperative that the stocks being purchased in this agreement are well-defined. To this end, Section II shall request the legal name of the Entity whose stocks are being sold. Produce its name on the “Entity Name” line of Section II.
(5) Entity Mailing Address. Dispense the Stock Entity’s complete mailing address as it is registered with the government.
(6) State Of Incorporation/Organization. The state where the Stock Entity formed by registering its intended operations for approval should be dispensed to the third line of Section II.
(7) Entity Type. Section II requires that the Stock Entity is properly categorized as a means of fully identifying it in this agreement. A checklist presenting various types of Entities has been made available for this purpose. Properly classify the Stock Entity’s type by placing a mark in the appropriate checkbox. For instance, if the Stock Entity is a “Corporation” then select the first checkbox and do not mark any of the remaining checkbox definitions (“LLC,” “Partnership,” “General Partnership,” Limited Partnership,” and “Other.”) Bear in mind that if a Stock Entity does not fit into any of the first five categories, the “Other” checkbox should be selected and the type of Entity whose stock is being sold should be documented directly on the blank line in this option.
III. Shares
(8) Number Or Percent Of Shares. Now that both the Stock Buyer and the Seller as well as the Stock Entity have been defined, the number of shares that shall be sold will be discussed. To establish the number of shares that the Stock Buyer will buy, present it to the space provided in the first area of Section III. If preferable, an entry of the percentage of available stock may be used to define how many will be sold through this agreement.
(9) Class/Series. The class and series of the stock that is being sold must be defined in this agreement. Supply the class then the series of the concerned stock to the second area of Section III.
IV. Purchase Price
(10) Total Price Of All Shares To Purchase. The payment the Stock Buyer must deliver to the Seller to obtain ownership of the shares being purchased should be documented in Section IV. Keep in mind this dollar amount must represent the exact payment expected for the total number of shares being sold.
V. Closing Date
(11) Date Of Stock Sale. The last calendar date when the exchange of the Seller’s stock for the Buyer’s payment may occur should be documented in Section V.
VI. Payment Methods
(12) Acceptable Method Of Purchase. It is necessary to establish the manner in which the Stock Seller may submit the payment required to purchase the above stock. To this end, select one or more of the payment options presented in Section VI to define the way the expected payment should be delivered. Thus, by selecting the “Bank Wire” and “Cash” checkboxes, Section VI will require payment from the Buyer to be submitted only with one (or both) of these methods. Section VI can be set to define an acceptable payment to be one made through a “Bank Wire,” in “Cash,” by a “Cashier’s Check,” or using some “Other” payment method (that is directly reported on the blank line provided) so long as the checkbox corresponding to the acceptable payment is marked.
VII. Deposit
Select And Complete Item 13 Or Select Item 16
(13) Requires A Deposit. If this agreement requires that the Stock Buyer deliver a deposit to the Seller, then the first checkbox statement available in Section VII should be selected.
(14) Amount Of Deposit. If a deposit is required, then the amount of money it consists of must be defined in the (selected) statement made by Section VII. Document the deposit amount required on the blank line attached to the dollar sign.
(15) Deposit Due Date. The final calendar date for the submission of the deposit will be defined when a predetermined number of days after the effective date of this agreement have elapsed. Dispense the maximum number of days after this agreement’s effective date that the Stock Buyer will be allotted to deliver the deposit amount to the Seller.
(16) Does Not Require Deposit. If this agreement will not demand a deposit for its satisfaction, then select the second checkbox found in the Seventh Section.
VIII. Due Diligence Period
Select And Complete Item 17 Or Select Item 20
(17) Requires A Due Diligence Period. Section VIII will seek to define whether the Stock Buyer shall require a period of due diligence so that he or she may assess the appropriateness of the stocks versus the goal of the Buyer’s participation in this sale. After which he or she would will have the option of formally proceeding with or terminating this agreement and the stock sale it represents. If this “Due Diligence Period” is required then mark the first checkbox statement and continue through the next two items to supply the information needed by this option.
(18) Details Of Diligence Period. If a due diligence period will be afforded to the Buyer in this agreement, then it must be assigned a definitive deadline. Such a deadline may potentially protect both Parties by requiring a definitive time frame for this agreement to continue or terminate after the due diligence period has begun. The due diligence deadline this agreement imposes on the Stock Buyer must be documented through its presentation across the first two lines provided by this option.
(19) Time Of Deadline. Furnish the exact time of day when the Stock Buyer’s due diligence decision to terminate or proceed with this agreement must become known to the Seller using the spaces provided then select the “AM” or the “PM” checkbox to indicate the time of day this decision is due.
(20) Does Not Require A Due Diligence Period. If the Buyer neither requires nor wishes this contract to call for a period of due diligence before continuing with this stock purchase, then select the “Does Not Require A Due Diligence Period” checkbox. Keep in mind that any selection made must remain compliant with all laws governing the sale of this stock.
XIII. Governing Law
(21) State Of Effect. The state where the stock sale discussed by this agreement will be governed (and if needed enforced) should be identified in Section XIII.
XV. Additional Terms & Conditions
(22) Details Of Unreported Conditions. Any agreements left unmentioned by the above document yet should be included in this contract and thus enforceable upon execution must be documented in Section XV. This section will allow additional space to be inserted at will and will expect the title of any attachment containing such additional information to be recorded.
XVI. Entire Agreement
(23) Buyer’s Signature. The Stock Buyer can only enter this contract through his or her binding signature. This should be presented by the Party who is named in the First Section as the Buyer or by the Signature Representative of the Business Entity that was identified as the Stock Buyer.
(24) Printed Name. The Signature Stock Buyer must print his or her name to aid in identifying his or her signature. If he or she represents a Business, then the title of his or her job should be presented in print with his or her name.
(25) Date Of Stock Buyer’s Signature. Once the Stock Buyer has signed this document and identified himself or herself, the date when these actions took place must be documented to the final line of his or her signature area.
(26) Stock Seller’s Signature. The Seller of the stock must sign this agreement to enter it. If a Business Entity is the acting Seller (as named in the First Section) then, a duly appointed Signature Representative of the Stock Seller should sign this document on its behalf.
(27) Printed Name Of Stock Seller. The Signature Stock Seller must print his or her name after signing this document and, if applicable, record the job title he or she holds with the Entity he or she is entering to this agreement.
(28) Date Of Stock Seller’s Signature. The date when the Stock Seller’s signature is completed must be produced to complete the signing process.
