What Are Stock Purchase Agreements?

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What Are Stock Purchase Agreements?

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. Stock purchase agreements may be created towards the end of the negotiation process so that the parties can finalize the terms into a binding contract.

The sale of stocks is highly regulated by state and federal laws, and the transactions must conform to the laws governing them. Stock purchase agreements help ensure that the sales are transparent by providing records of the parties’ intentions and agreements.

What Is Contained in a Stock Purchase Agreement?

Stock purchase agreements should contain vital pieces of information such as:

Thus stock purchase agreements should clearly spell out all the important terms of a stock purchase and sales transaction. That way, the parties can refer to the document in case there are any questions or legal disputes over the exchange.

When Are Stock Purchase Agreements Invalid?

Stock purchase agreements may be invalid if they violate any business or corporate laws. A common example of this is where a stock purchase agreement is found to involve insider trading or other securities violations. In such cases, the court may invalidate the agreement, as contracts for illegal subject matter are not enforceable.

A stock purchase agreement can also be invalid if it was formed under conditions of duress, deceit, or fraud. For instance, if the seller made false representations regarding the stocks, it could create legal liability for them. An example of this is where the agreement lists as sale of preferred stocks, but instead common stocks or other lower grade stocks are sold.

Do I Need a Lawyer for Help with Stock Purchase Agreements?

Stock purchase agreements are important for ensuring that securities transactions are conducted properly. Violations of stocks and securities laws can lead to serious penalties, and sometimes may result in federal charges. You may wish to hire a lawyer if you need help drafting or reviewing a stock purchase agreement. Your attorney can provide you with input during the process, and can also represent you during trial if you need to file a claim.

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Last Modified: 02-05-2014 10:57 AM PST

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