11 Things to Include in a Stock Purchase Agreement

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 2,656 reviews

Jump to Section

Need help with a Stock Purchase Agreement?

Post Project Now

Post Your Project (It's Free)

Get Bids to Compare

 Hire Your Lawyer

A stock purchase agreement is used when someone buys shares of a company. It allows them to finalize their purchase by signing a legally binding document.

When selling parts of an owned company, you may sign a stock and asset purchase agreement. Companies with investors wishing to become shareholders will need to know the elements of a stock purchase agreement.

Here are 11 things to include in a stock purchase agreement.

1. Buyer and Seller Information

The stock purchase agreement opens with an introduction of the buyer and seller. Company names and legal first and last names are acceptable.

Whenever a business or individual buys or sells shares to another business or individual, they need a stock purchase agreement that illustrates the relationship between buyers and sellers.

The exact type of SPA and the legal language it includes will vary by company, scale, and industry.

If one or both parties are corporations, then the SPA must specify:

  • The full legal names of signing parties
  • Parties’ professional titles and the operating names of their companies

Here is an article that overviews a stock purchase agreement and provides an example contract for you to review.

2. Transaction Date and Time

The stock purchase agreement should include the effective date and time of the transaction. This date differs from the settlement date, which is generally two days after the agreement’s execution date.

Here is an article where you can learn more about the difference between trade and settlement dates.

3. Value of Shares

Most notably, the value of the shares sold or acquired should be written in detail.

The value of the shares should reflect a cash amount the buyer will pay upon closing.

The current shareholders’ ownership of the company should be clear. You can also express how much ownership the investor will acquire after completing the purchase.

In cases of employers selling stocks to employees, there may be a restricted stock plan in place. This plan complies with the Securities and Exchange Commission (SEC). In addition, it helps protect the company against premature sales that could negatively impact its financial standing.

Here is an article that explains how to create a stock purchase agreement.

4. Number of Shares Being Sold

State the specific number of shares in the stock purchase agreement and their selling price.

The number of shares available to sell can only be determined by the company’s sole owners or shareholders. For example, restricted stock is unable to be sold without SEC permission. On the other hand, float stock can be freely sold and bought without public restrictions.

There are also authorized shares, the total amount of shares a company can issue to buyers.

Here is an article where you can learn more about the basics of different types of shares and stock.

Meet some lawyers on our platform

Namrita N.

13 projects on CC
View Profile

Daehoon P.

72 projects on CC
View Profile

Tabetha H.

10 projects on CC
View Profile

Jeremiah C.

37 projects on CC
View Profile

5. Representations and Warranties

Representations are statements made by sellers about the transaction. They may make statements on behalf of their companies in cases of corporations buying shares of another company.

The representations in a stock purchase agreement include:

  • The seller’s standing on the purchase
  • Their company’s market reputation, value, directors, and capital structure
  • The seller’s rights over the shares in question
  • The number of shares that the seller currently owns in the company
  • Validity of terms, conditions, and factual information presented about the company

The buyer can also make representations and warranties. These include the buyer’s standing, company capital structure, market value, and rights to enter into stock agreements.

Here is an article that explores the legal nature of stock representations and warranties.

6. Payment Terms

Whether an employee stock purchase plan or transfer agreement between shareholders, the agreement must lay out payment terms and structure.

The payment terms outline the process that transfers stock ownership from the seller to the buyer.

Information such as the closing amount, deposit, and sum are held in escrow for breaches of contract.

You should also include information about how any assets will be transferred and when the investor can expect to receive dividends.

Here is an article to learn more about payments and stock dividends.

7. Due Diligence

A due diligence investigation takes place before selling a company’s stock. The buyer reviews all relevant financial, operational, and performance forecasts to make an informed decision about their purchase.

The buyer agrees to commence due diligence upon the effective date of the contract, and they agree to complete their due diligence research before closing.

You should specify a deadline that the buyer must complete their due diligence review. If unsatisfied and wish to proceed no longer, they have the right to back out of the agreement and receive a deposit reimbursement.

Here is an article where you can review the steps of the due diligence process.

8. Indemnification

In SPAs, the hold harmless clauses allow one party to hold another accountable (indemnify) if they fail to act upon the agreed-upon terms and conditions of the contract.

This portion of your SPA can grant the seller the right to indemnify the buyer, their affiliates, and organizations accountable for damages or losses caused by negligence, omissions, or breaches of representation, warranty, or covenant.

9. Termination Clause

If one or both parties default or want to end the contract, a termination clause outlines the processes for formally ending the agreement.

Termination clauses can also be a part of employment contracts. For example, in an SPA, employers may specify what will happen to an employee’s shares or stake in the company if terminated.

The termination clause can be as general or specific as parties see fit; during negotiation, the parties can discuss what circumstances and events they are willing to accept as reasonable cause for termination without dispute.

Here is an article that covers termination clauses.

10. Closing Conditions

The closing conditions portion of the stock purchase agreement covers what terms and conditions must be fulfilled to complete the transfer of shares or assets.

Closing conditions will range from company to company and even from company to individual buyer.

After closing conditions are met, the buyer and seller agree to sign on an official closing date. The closing date marks the completion of the transaction, as the seller transfers ownership of the shares/assets to the buyer in exchange for a monetary sum.

Here is an article that explores the details of closing conditions.

11. Signature of the Buyer and Seller

Formally close the stock purchase agreement with signatures from all parties. There should be clear signature lines and datelines at the bottom of the document’s last page.

Buyers and sellers should use their legal names, as well as their professional titles and organizations, e.g., “Chief Executive Officer of [Company Name].”

Post a project in ContractsCounsel’s marketplace to receive flat fee bids from lawyers for your project. All lawyers have been vetted by our team and peer-reviewed by our customers for you to explore before hiring.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Lawyers

View Yaser
Member Since:
July 21, 2021

Yaser M.

Self Employed
Free Consultation
Get Free Proposal
12 Yrs Experience
Licensed in TX
University of London

I have practiced law in foreign jurisdiction for more than 11 years and more than one year in Texas. I am Texas licensed attorney. Practice areas include Corporate: incorporation of business entities, drafting of operating agreements, by-laws, and business contracts; Commercial: business disputes, demand letters, cease and desist lettera, dealing with insurance companies, negotiations, settlements of disputes, commercial real estate, and business litigation Litigation: business disputes, personal injury, civil rights, cross-border matters, maritime matters, drafting of litigation pleadings, motion practice, legal research, white-collar defense.

View Joseph
Member Since:
July 25, 2021

Joseph L.

Free Consultation
Get Free Proposal
39 Yrs Experience
Licensed in CT
Southwestern University School of Law

Mr. LaRocco's focus is business law, corporate structuring, and contracts. He has a depth of experience working with entrepreneurs and startups, including some small public companies. As a result of his business background, he has not only acted as general counsel to companies, but has also been on the board of directors of several and been a business advisor and strategist. Some clients and projects I have recently done work for include a hospitality consulting company, a web development/marketing agency, a modular home company, an e-commerce consumer goods company, an online ordering app for restaurants, a music file-sharing company, a company that licenses its photos and graphic images, a video editing company, several SaaS companies, a merchant processing/services company, a financial services software company that earned a licensing and marketing contract with Thomson Reuters, and a real estate software company.

View Harry
Member Since:
July 27, 2021

Harry S.

Free Consultation
Get Free Proposal
8 Yrs Experience
Licensed in NY

Stirk Law is a law firm based in London that advises on dispute resolution, commercial and corporate arrangements, employment and private wealth. We are experts in our areas and experienced in advising on complex and high value matters in the UK and internationally. We have extensive onshore and offshore experience across a variety of areas such as the administration of trusts together with complex fraud and trust disputes. Our expertise includes the conduct of significant and high-value cases valued at up to in excess of £1 billion over a combined 40 years of legal practice in England, Jersey and Guernsey. As well as having a large international network, we work closely with a corporate investigations and risk advisory business based in London and Vienna. Together we can deliver a holistic service for cases involving fraud, dissipation of assets or other illegal activity.

View Talin
Member Since:
July 29, 2021

Talin H.

Free Consultation
Get Free Proposal
13 Yrs Experience
Licensed in IL
DePaul College of Law

Talin has over a decade of focused experience in business and international law. She is fiercely dedicated to her clients, thorough, detail-oriented, and gets the job done.

View Sam
Member Since:
July 30, 2021

Sam W.

Entertainment attorney
Free Consultation
Get Free Proposal
Los Angeles
8 Yrs Experience
Licensed in CA
Columbus School of Law, The Catholic University of America

Entertainment attorney and film producer. Counsel clients on all matter of entertainment-related contracts, including talent representation, crew deals, financing agreements, and production legal. Former litigation attorney and owner of a documentary and scripted film and television production company. Well versed in small business foundation and general business contracts.

View Craig
Member Since:
August 2, 2021

Craig M.

Free Consultation
Get Free Proposal
6 Yrs Experience
Licensed in ME
New York Law School

I have been practicing law for more than 4 years at a small firm in York County, Maine. I recently decided to hang my shingle, Dirigo Law LLC. My practice focuses mostly on Real Estate / Corporate transactions, Wills, Trusts, and Probate matters.

View Tim
Member Since:
August 3, 2021

Tim M.

Managing Partner
Free Consultation
Get Free Proposal
Cambridge, MA
24 Yrs Experience
Licensed in MA, NY
Boston College Law School

Tim has 20 years of experience representing a wide variety of emerging and established companies in the technology, software, bitcoin and professional services industries. He works directly with his clients’ executives and boards of directors on corporate, intellectual property, and securities law issues. Recently, Tim has advised clients on Series A and Series B financings, corporate structuring, complex video licensing agreements, and structuring new hedge funds. Tim previously served as Forrester Research, Inc.’s General Counsel and Secretary where he was chief legal officer, led the company’s legal group, and managed the company’s legal and regulatory affairs. Tim played an integral role in the company’s initial public offering in 1997 and coordinated its secondary offering in 2000. He directed the legal process in the company’s acquisitions of Giga Information Group, Inc., Fletcher Research and Forit GmbH and oversaw over $125million in transactions. He also managed the company’s intellectual property assets. Tim is admitted to practice in Massachusetts and New York. Tim holds a Juris Doctor degree from the Boston College Law School and a Bachelor of Arts degree from Trinity College

View Melissa
Member Since:
August 5, 2021

Melissa G.

Owner/Managing Member
Free Consultation
Get Free Proposal
18 Yrs Experience
Licensed in DC, IL, OH
University of Michigan

Melissa Green recently opened her own law firm which focuses on providing general counsel services, business formation services, and contract services (including negotiation assistance). Prior to opening her own firm, Melissa joined the American Medical Association (AMA) as an Assistant General Counsel in November 2019. In her role at the AMA, Melissa supported the CPT and Masterfile licensing programs, in addition to supporting the legal needs of the Professional Satisfaction and Practice Sustainability business unit. Prior to arriving at the AMA, Melissa was the Chief Legal Counsel and Privacy Officer at The Chartis Group, a healthcare advisory services and analytics company, headquartered in Chicago, where she was responsible for commercial transactions for Chartis and its wholly owned SaaS company, and also served as the organization’s privacy officer responsible for HIPAA compliance. Melissa started her legal career in Cincinnati, Ohio at the law firm of Frost Brown Todd where she served as an associate in the Corporate department doing healthcare transactions, securities, and general corporate work. In 2007, Melissa transitioned into her first in-house counsel role at GE Aviation. During her time at GE, she had many roles including supporting new engine sales transactions for the Europe/Middle East/Africa region, its Electric Power business located in Dayton, its Engine Services business (supporting the CF34 and CF6 engine lines), and compliance. Upon leaving GE, Melissa had a brief stint at MedStar in Virginia before accepting a full-time position at the University of Maryland Medical System in Baltimore, Maryland in July 2013. Originally from East Lansing, Michigan, Melissa received her bachelor’s graduate from Michigan State University’s – James Madison College and is a graduate of the University of Michigan Law School.

View Robert Jay
Member Since:
August 4, 2021

Robert Jay H.

Free Consultation
Get Free Proposal
New York, NY
41 Yrs Experience
Licensed in NY
New York University School of Law

My Legal career hasfocused on representing businesses (corporations and limited liability companies) as general outside counsel. In this capacity, I have drafted a broad range of legal documents as well as analyzed proposed agreements drafted by the other party's attorney to the agreement for the pupose of determining the risks to which my client would be exposed. I maintained the client's minute book if no one in-house was available for that task. Additionally, if rquested, I served as a general advisor to the client's executive offers and to its Board of Directors.

View Simon
Member Since:
August 5, 2021

Simon C.

Corporate Attorney
Free Consultation
Get Free Proposal
18 Yrs Experience
Licensed in UT
Brigham Young University Law School

Corporate counsel with years of in-house experience working with and reporting to board / executive-level and upper management, along with extensive regional / national law firm background in commercial transactions and contracts, complex commercial litigation, and employment matters. Skilled at executing corporate priorities, driving profitability by implementing goal-oriented processes to achieve revenue and productivity targets, and managing company litigation and outside counsel. Recognized for creating policies and practices to address ethical dilemmas and resolving misconduct.

View T. Phillip
Member Since:
August 10, 2021

T. Phillip B.

Free Consultation
Get Free Proposal
26 Yrs Experience
Licensed in IL
Drake University Law School

Attorney creating plans and strategies to help individuals create, build, protect and pass on wealth.

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call