Stock Transfer Agreement: Everything You Need To Know About It

On June 4, 2020, in Corporate, by John A. Weber IV, ESQ.
Stock Transfer Agreement

Alternatively known as a share purchase agreement or a stock purchase agreement, a stock transfer agreement lays down the terms and conditions of the sale and purchase of the shares of a company. This agreement transfers all the rights in the shares from one person to another.  This agreement differs from an “asset purchase agreement” and hiring the right attorney who knows the differences could very well mean the difference between success and failure of your new business. 

Key Clauses of Stock Transfer Agreement

Here is a list of the key clauses of a stock transfer agreement:

  1. Transfer of shares
  2. Transfer of price
  3. Cost of transfer
  4. Mode of payment
  5. Transfer completion
  6. Representations and warranties of the transferor
  7. Representations and warranties of the transferee
  8. Conditions precedent
  9. Conditions subsequent
  10.  Execution and delivery
  11.  Modification of the agreement
  12.  Termination of the agreement
  13.  Governing law and jurisdiction
  14.  Arbitration
  15.  Notices

The agreement should state every detail clearly. Whenever a company or a person invests in shares of another company or purchases shares from an individual, it creates the need for a corporate stock transfer agreement.

Benefits of a Stock Transfer Agreement

There are a few benefits of a stock transfer agreement:

  1. A stock transfer agreement puts all the terms and conditions in writing and gets both parties on the same page. This prevents any misunderstandings from cropping up.
  2. This agreement shows that the transferor is the owner of the stock.
  3. It leads to the creation of a binding transfer.
  4. Representations and warranties of the transferor, as well as the transferee, are mentioned in the stock transfer agreement. This leaves no room for misrepresentations of either party.

Violation of a Stock Transfer Agreement

A stock transfer agreement has a clause that mentions the actions that can be taken in case any party violates it. Most of the agreements contain an arbitration clause, which states that in case a clause is violated, the matter will be resolved by arbitration. Alternatively, other forms of dispute resolution may be mentioned.

The Law Firm of Vaughn, Weber & Prakope, PLLC has rich expertise in dealing with the formation of a stock transfer agreement. Seek help now!

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