ContractsCounsel Logo

Stock Purchase Agreement

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 7,494 reviews
Home Types of Contracts Stock Purchase Agreement

Jump to Section

Need help with a Stock Purchase Agreement?

Create a free project posting

Stock purchase agreements address the complicated legal issues that these types of transactions face. However, drafting the proper documentation will help you avoid legal pitfalls and future disputes. Contract drafting requires knowledge about how they work, what to include, and other vital details.

In this article, we’ve described stock purchase agreements and what you should know before drafting or signing one.

What is a Stock Purchase Agreement?

A stock purchase agreement, also known as an SPA, is a contract between buyers and sellers of company shares. This legal document transfers the ownership of stock and detail the terms of shares bought and sold by both parties.

Other names for stock purchase agreements include:

Regardless of what you call your agreement, prioritize the drafting of the terms and conditions . A wrongly worded contract can create unintended legal consequences, which means that it’s essential to get this aspect right.

This web page also defines stock purchase agreements.

What’s Included in a Stock Purchase Agreement?

Stock purchase agreements contain specific terms and conditions that set the relationship between buyers and sellers. The seller transfers and delivers all certificates from the transaction, and buyers reasonably expect one built on good faith. Creating a comprehensive stock purchase agreement will help parties avoid legal disputes and navigate their legal relationship.

These are the nine terms you may want to include in your stock purchase agreement:

Term 1. Parties and Agreement Date

The opening paragraph should include party names and agreement date, and it needs to communicate that both parties are entering into an agreement that doesn’t begin until the date specified. You do not have to make this section overly lengthy either.

Term 2. Price and Shares

This section contains information about the issuing corporation or shareholder, quantity, and each share’s value. The value of stock shares is usually set at market value on the day of closing.

Term 3. Purchase and Sale

Your contract needs a statement acknowledging that the seller transfers ownership of the stock certificates to the purchaser upon transaction completion. The seller must transfer all certificates while taking care of any applicable transfer taxes.

Term 4. Warranties and Representations

Buyers and sellers must work in good faith and fair dealing during a stock purchase and sale. Stock purchase agreements should verify the corporation’s good standing and bonafide ability to sell the stocks. Seller’s and buyer’s representations signify that no parties have made any errors or omissions and that the transaction is presented transparently and as communicated.

Term 5. Choice of Law

The corporation should establish the choice of law that will oversee a civil lawsuit should litigation arise. Otherwise, the purchaser could require you to travel to their state for meetings, hearings, and other legal proceedings. This situation can add time and expense to handling disputes with the other party.

Term 6. Payment Terms

Stock purchase agreements establish the terms under which the purchaser will pay the seller for shares of stock. This number is often a percentage paid upon contract signing, with the remaining balance paid upon final contract execution.

Term 7. Due Diligence

Most buyers need a due diligence period to inspect the seller’s and company’s financial records. They often have sole discretion regarding the validity of the shares for the intended sale. It is not unusual for sellers to require a due diligence report by a specific date.

Term 8. Closing Date and Time

The closing date and time is a reference to when the stock closing occurs. This date is essential for determining share price, and it usually occurs within a few days of signing the stock purchase agreement.

Many contracts also include buyer and seller requirements to deliver tax forms and final closing statements before and after the transaction as negotiated in the agreement. You should discuss the closing date terms and conditions since this provision is more important than it appears.

Term 9. Signature and Date

The last section of your stock purchase agreement includes a signature and date line for both parties’ signing. Most stock purchase agreements do not require notarization, and a simple acknowledgment of the willful desire to enter into a contract is usually sufficient.

Here is an example of a stock purchase agreement at the website .

Meet some lawyers on our platform

Ryenne S.

434 projects on CC
View Profile

Morgan S.

6 projects on CC
View Profile

Nicholas M.

7 projects on CC
View Profile

Sara S.

40 projects on CC
View Profile

How To Write a Stock Purchase Agreement

You write a stock purchase agreement if you are the seller. Delegate this responsibility to your legal department to draft the terms and conditions. If you don’t have in-house or outside counsel, consider a virtual provider to help you through the legal drafting process.

Below, we’ve outlined a hypothetical example of how a stock purchase agreement works:

  • Senpai Corporation sells stocks on the public corporation
  • Argus Smith wants to purchase 1,000 shares from Senpai
  • Senpai drafts a stock purchase agreement to formalize the transaction
  • The SPA specifies that Mr. Smith will buy 1,000 shares
  • The price is set according to the closing date of the transaction
  • Smith agrees to complete his due diligence reporting within 30 days
  • Both parties sign the agreement
  • Senpai transfers the stocks to Mr. Smith
  • Smith performs his due diligence audit and analysis
  • He finds no problem and indicates as such in writing to Senpai
  • The transaction is complete

Stock purchases are relatively straightforward transactions. However, there are legal issues to consider that are more complex, such as due diligence and timing, that you may want to discuss with securities lawyers , and they can offer guidance during the contract and transaction process.

ContractsCounsel Stock Purchase Agreement Image

Image via Pexels by Burak

Who Are the Parties in Stock Purchase Agreements?

The parties in a stock purchase agreement are the buyers and sellers of shares. Sellers are stock-issuing corporations or shareholders, and buyers are the ones who want to purchase stocks. Stock purchase agreements should expressly refer to the parties and their roles to make them legally binding.

Stock Purchase Agreement vs. Asset Purchase Agreement

Buyers and sellers use stock purchase agreements when they want to buy or sell stocks. They use asset purchase agreements when purchasing company assets, not through a merger or acquisition. Stock acquisitions, by nature, are also less expensive than asset purchases since they are not subject to additional taxes.

Here are a few other differences between stock purchase agreements versus asset purchase agreements below:

Asset Purchase Agreements

Asset purchase agreements, also called buyer purchase agreements and APAs, outline the terms around the purchase of assets from a buyer to a seller. Buyers usually use them to acquire devalued company assets, allowing the buyer to increase the tax value of those assets, while the seller has the opportunity to liquidate them for cash or in exchange for other assets.

Stock Purchase Agreements

Companies can use stock purchase agreements to purchase, sell, and transfer ownership over stocks and shares. Even though stocks are financial assets, asset purchase agreements do not sufficiently address the legal issues of a stock purchase. Always get legal advice from an attorney when you have questions.

Get Legal Help with Stock Purchase Agreements

Stock purchase agreements are critical since they formalize the sale’s terms. This strategy can help avoid misunderstandings that could end up in court. Work with securities lawyers near you to learn more about drafting a personalized contract that protects your rights.

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

Need help with a
Stock Purchase Agreement?

Create a free project posting

Meet some of our Stock Purchase Agreement Lawyers

Michael S. on ContractsCounsel
View Michael
5.0 (4)
Member Since:
April 16, 2023

Michael S.

Managing Partner
Free Consultation
Los Angeles, California
28 Yrs Experience
Licensed in CA, NY
Harvard Law School

I began my career at "big law" firms, worked in-house for 14 years, and now have my own practice, providing big law quality at small firm rates. My practice focuses on strategic and commercial transactions, including M&A, preferred stock and common stock offerings, asset purchases and sales, joint ventures and strategic partnerships, stock option plans, master services agreements and SOWs, software development and license agreements, SaaS agreements, NDAs, employment and consulting agreements. I also manage corporate governance, advise boards and executives, and act as outside general counsel. I represent clients across the country and around the world.

Kelvin R. on ContractsCounsel
View Kelvin
4.8 (11)
Member Since:
February 25, 2022
Michael O. on ContractsCounsel
View Michael
5.0 (4)
Member Since:
February 14, 2022

Michael O.

Managing Attorney
Free Consultation
Los Angeles
16 Yrs Experience
Licensed in CA, NY
University of Southern California

A corporate and commercial attorney with experience in transactional legal services including corporate and finance transactions, mergers and acquisitions, real estate, commercial contracts, bankruptcy, restructuring, international business transactions and general counsel services. Additional background skills and experience include investment banking, financial analysis, and commercial litigation. Sectors covered include technology, media, franchises, and business services providers, from start-ups to medium and large enterprises.

Fabian G. on ContractsCounsel
View Fabian
4.5 (2)
Member Since:
May 9, 2023

Fabian G.

Managing Attorney at Apex Legal Solutions PLLC
Free Consultation
Miami, Florida
2 Yrs Experience
Licensed in FL
University of Miami School of Law

Fabian graduated with honors from the University of Miami School of law, where he served as the articles and comments editor for the law school's Race and Social Justice Law Review. He received the John F. Evans Memorial Scholarship Award for excellence in the university's Litigation Skills Program and the HOPE Pro Bono award for completing more than one hundred (100) pro bono hours. Additionally, he received the CALI Excellence for the future award in Sports Law. He focuses his practice on corporate, real estate and immigration matters. Fabian has experience representing luxury hotel owners and operators in connection with the drafting of hotel management agreements, restaurant license agreements, and complex restaurant leases for domestic and international projects including: Nobu Tulum, Nobu Punta Cana, Nobu Orlando, Nobu Chicago and the Nickelodeon Hotel in Riviera Maya, Mexico, among others. He has represented clients in the commercial real estate industry in connection with the drafting of purchase and sale agreements, promissory notes, and mortgages. Lastly, Fabian routinely counsels corporate clients in connection with the drafting of articles of organization, operating agreements, and other documents related to acquisitions, restructurings and investments.

N'kia (. on ContractsCounsel
View N'kia
Member Since:
May 9, 2023

N'kia (.

Founding Partner
Free Consultation
North Carolina
7 Yrs Experience
Licensed in NC
NCCU School of Law

As a business law attorney with substantial litigation experience, my focus is supporting clients in future-proofing their businesses through legally-sound contracts.

Venus C. on ContractsCounsel
View Venus
Member Since:
May 9, 2023

Venus C.

Managing Member, Attorney
Free Consultation
West Palm Beach, Florida
19 Yrs Experience
Licensed in FL
Nova Southeastern University, Shepard Broad College of Law, J.D., magna cum laude

Venus Caruso is a Florida-based attorney who has been helping companies and professionals with their contract needs for over 18 years. She leverages her 10 years spent as a complex commercial litigator and 7 years spent as in-house legal counsel to advise and guide clients on business matters involving commercial transactions and contracts, from drafting and redlining to advising. The types of contracts Venus handles include NDAs, confidentiality agreements, independent contractor agreements, employment agreements, consulting agreements, services agreements, marketing agreements, commission agreements, distribution agreements, non-competition and non-solicitation agreements, non-circumvention agreements, sales rep agreements, vendor agreements, Florida LLC operating agreements, contract amendments, and termination of contract agreements (among others). In addition to contracts, Venus helps companies with internal company policies, external policies, templates, forms, codes of conduct, and consumer facing web terms and policies. Past representative clients include public companies, national law firms, startups, small and mid-sized businesses, directors and officers, consultants, professionals, and health care facilities and providers.

Erik W. on ContractsCounsel
View Erik
Member Since:
May 22, 2023

Erik W.

Free Consultation
Orlando, Florida
13 Yrs Experience
Licensed in FL
Florida A&M University College of Law

Erik J. Washington completed his undergraduate studies at Florida A&M University, where he earned his Bachelor of Science degree in Business Administration with a concentration in Finance. Mr. Washington went on to earn his Juris Doctor from Florida A&M University College of Law. Upon receiving his J.D., Mr. Washington was admitted to The Florida Bar and the United States District Court, Middle District of Florida. Mr. Washington started his legal career by working with a boutique Orlando law firm where his practice concentrated on family law, bankruptcy, helping clients with estate planning and probate matters, and advising homeowner’s association boards on proper administration. After that experience Mr. Washington later joined another mid-size Orlando law firm where he would eventually become the Managing Consumer Bankruptcy Attorney where he oversaw the filing and administration of hundreds of chapter 7 and chapter 13 cases. Prior to starting the Washington Law Firm, Mr. Washington was an associate at a Central Florida Bankruptcy law firm working under the tutu ledge of a highly respected bankruptcy attorney with over 20 years of bankruptcy experience. Mr. Washington has learned that bankruptcy is a tool designed that not only benefits a person in debt but is also good for the economy as a whole. It is because this new beginning and fresh start that it becomes a means of not only helping a person in debt, but it gives that person once in debt the chance to reestablish good credit and yet again borrow money to spend. Mr. Washington focuses on consumer bankruptcy, real estate, probate, and auto accidents.

Find the best lawyer for your project

Browse Lawyers Now
Financial lawyers by top cities
See All Financial Lawyers
Stock Purchase Agreement lawyers by city
See All Stock Purchase Agreement Lawyers

ContractsCounsel User

Recent Project:
Draft Restricted Stock Program for Early Stage Tech Co.
Location: California
Turnaround: Over a week
Service: Drafting
Doc Type: Stock Purchase Agreement
Number of Bids: 5
Bid Range: $500 - $2500

ContractsCounsel User

Recent Project:
Review Founder Grant Term Sheet
Location: New York
Turnaround: A week
Service: Contract Review
Doc Type: Stock Purchase Agreement
Page Count: 15
Number of Bids: 3
Bid Range: $600 - $800
related contracts
See More Contracts
other helpful articles

Need help with a Stock Purchase Agreement?

Create a free project posting

Want to speak to someone?

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

Request a call

Find lawyers and attorneys by city