Stock Purchase Agreement

Table of Contents

In the world of business acquisitions, having a clear and comprehensive agreement is essential. A Stock Purchase Agreement (SPA) is a critical document that outlines the terms and conditions of the sale of company shares. To assist our clients and community, DueDilio is proud to offer a comprehensive Stock Purchase Agreement template.

For further reading, we invite you to explore our article on stock vs. asset deal structures.

What is a Stock Purchase Agreement?

A Stock Purchase Agreement (SPA) is a legal document used when a buyer purchases shares of a company from a seller. This agreement details the terms and conditions of the transaction, including the number of shares being sold, the purchase price, and the representations and warranties of both parties.

Why a Stock Purchase Agreement is Essential

An SPA is crucial for several reasons:

  • Clarity and Protection: Clearly defines the terms of the transaction, protecting both the buyer and the seller.
  • Detailed Terms: Provides a detailed outline of the transaction, including purchase price, payment terms, and any conditions precedent.
  • Legal Framework: Establishes a legal framework that can be enforced if any party breaches the agreement.
  • Trust Building: Ensures mutual understanding and trust between the parties by outlining the rights and responsibilities of each.

Comparing a Stock Purchase vs. an Asset Purchase

Understanding the differences between a stock purchase and an asset purchase is essential for making informed decisions in business acquisitions:

Ownership and Control:

    • Stock Purchase: Involves buying the company’s shares, thereby acquiring ownership of the entire company, including all its assets and liabilities. This means the buyer takes control of the company as a whole.
    • Asset Purchase: Involves buying specific assets and liabilities of the company. The buyer can select which assets and liabilities to acquire, allowing for more control over what is purchased.

Liabilities:

    • Stock Purchase: The buyer assumes all the company’s liabilities, including known and unknown debts and obligations.
    • Asset Purchase: The buyer typically avoids assuming the seller’s liabilities, only taking on those explicitly agreed upon.

Complexity and Continuity:

    • Stock Purchase: Offers continuity for the company as a legal entity, which can be beneficial for existing contracts, permits, and licenses.
    • Asset Purchase: May require new contracts, permits, and licenses, as the transaction does not involve the legal entity itself, but rather its individual assets.

Tax Implications:

    • Stock Purchase: The tax basis of the company’s assets remains unchanged, which may affect future depreciation.
    • Asset Purchase: Allows for a step-up in basis for the acquired assets, potentially offering depreciation benefits to the buyer.

For more details, we invite you to explore our in-depth article on deal structures.

Key Components of Our Stock Purchase Agreement Template

Our SPA template is designed to cover all critical aspects of a stock purchase transaction. Here’s what you’ll find inside:

  1. Introduction: Statement of purpose and identification of the parties involved.
  2. Sale and Purchase of Shares: Detailed description of the shares being sold and purchased.
  3. Purchase Price: The agreed-upon purchase price and terms of payment.
  4. Representations and Warranties: Assurances provided by both the seller and the buyer regarding the condition and ownership of the shares.
  5. Covenants: Ongoing obligations of both parties before and after the transaction.
  6. Conditions Precedent: Conditions that must be met before the sale can be finalized.
  7. Closing: Procedures and documentation required at the closing of the transaction.
  8. Indemnification: Provisions to protect both parties from potential claims and liabilities.
  9. Termination: Terms under which the agreement can be terminated.
  10. Governing Law: Legal framework governing the SPA.

How to Use the Template

Using our SPA template is straightforward:

  1. Download the Template: Click the link below to download the template.
  2. Customize for Your Transaction: Fill in the necessary details specific to your transaction, including the number of shares, purchase price, and other relevant terms.
  3. Review with Legal Counsel: While our template provides a comprehensive framework, it’s essential to have it reviewed by your legal counsel to ensure it meets all legal requirements and suits your specific needs.
  4. Execute the Agreement: Once reviewed and agreed upon by both parties, execute the agreement to formalize the transaction.

Conclusion

At DueDilio, we’re committed to providing the tools and resources you need for successful business transactions. Our Stock Purchase Agreement template is designed to simplify the process and offer peace of mind. Download it today and take control of your business acquisitions with confidence.

Download Stock Purchase Agreement Template

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FAQ

Frequently Asked Questions

A Stock Purchase Agreement (SPA) is a legal document used when a buyer purchases shares of a company from a seller. It outlines the terms and conditions of the transaction, including the number of shares, purchase price, and the representations and warranties of both parties.

An SPA is essential for providing clarity and protection, defining detailed terms, establishing a legal framework, and ensuring mutual understanding and trust between the parties.

Our SPA template includes:

  • Introduction
  • Sale and Purchase of Shares
  • Purchase Price
  • Representations and Warranties
  • Covenants
  • Conditions Precedent
  • Closing
  • Indemnification
  • Termination
  • Governing Law

Yes, the template is designed to be customizable. You can fill in the specific details of your transaction, such as the number of shares, purchase price, and other relevant terms. We recommend having it reviewed by your legal counsel to ensure it meets all legal requirements and suits your specific needs.

While our template provides a comprehensive framework, it’s essential to have it reviewed by your legal counsel to ensure it meets all legal requirements and suits your specific transaction. A lawyer can help you address any specific legal considerations and ensure the agreement is legally sound.

  • Stock Purchase Agreement (SPA): Involves buying the company’s shares, thereby acquiring ownership of the entire company, including all its assets and liabilities. Offers continuity for the company as a legal entity, but the buyer assumes all existing liabilities.
  • Asset Purchase Agreement (APA): Involves buying specific assets and liabilities of the company. Allows the buyer to select which assets and liabilities to acquire, typically avoiding unwanted liabilities, but may require new contracts and permits.

An SPA outlines the representations and warranties provided by both parties, which helps in identifying the information that needs to be reviewed during the due diligence process. It ensures that both parties have a clear understanding of the necessary steps before finalizing the transaction.

To download the SPA template, simply provide your contact details in the form found in this article.  

Important Disclaimer:
The information provided in this document is for general informational purposes only and does not constitute legal or financial advice. DueDilio does not make any warranties or representations for the completeness, reliability and accuracy of the information provided herein and does not assume any responsibility for errors or omissions in the content thereof. For the avoidance of doubt, any person’s use of or reliance on the contents of this document is strictly at their own risk, and DueDilio shall in no event be liable in any way whatsoever for such use or reliance. Users of this document should contact their attorney to obtain relevant legal advice in this regard.

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Picture of Written by Roman Beylin

Written by Roman Beylin

Roman Beylin is the founder of DueDilio, a leading online marketplace to assemble an M&A deal team. Our large and growing network of highly vetted independent professionals and boutique firms specialize in M&A advisory, due diligence, and post-acquisition value creation.

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