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What Are Stock Purchase Agreements?

An attorney for over 25 years, Robert Heist is the president of R. Connor & Associates, P.C., based in Chicago, Illinois. Focused on commercial matters, attorney Robert Heist helps corporate clients in business-related contract matters, such as drafting share purchase agreements.

A stock purchase agreement is a definitive agreement that details the sale or purchase of shares in a company. The sellers can be the company itself or its shareholders while the purchasers can be another company or an individual. A stock purchase agreement is not an asset purchase agreement. The latter is an agreement for the purchase or sale of a company’s assets while the former is an agreement for the purchase or sale of a company’s stock.

A share purchase agreement has various important components, some of which are listed below.

1. Details of stock purchase. These include details of the actual sale. For example, the date of the purchase, number of shares on sale, purchase price, price adjustments, and identities of the seller and buyer.
2. Warranties of seller and buyer. These are the sworn statements of the seller and buyer regarding the true amounts. These statements cover all material disclosures regarding the sale and purchase of stock.
3. Employee-related matters. This includes terms about how employee-related matters will be handled.
4. Dispute resolution mechanisms. These are related to how disputes arising after the agreement will be solved.

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