How to Read Stock Purchase Agreements – Beginning Investing

Stock purchase agreements are contracts that are signed by the company that is offering the investment opportunity and the investor who is supplying funds to be used. There are many important sections of stock purchase agreements, and it is important to know how to read these agreements in order to make the wisest financial choices available. It is always important for a financial adviser or a financial attorney to review the documents before they are signed. This will help to weed through the fine print and be sure that the contract benefits both parties.

When reading stock purchase agreements, it is important to be sure that all agreed upon components are mentioned in the contract. There are a few important components that should always be included in stock purchase agreements. These components include the date of the agreement, the number of shares being purchased, the price per share, the warranties and representations of the seller as well as the purchaser, provisions and witnesses. Each of these sections should always be include in this type of contract. There may be other sections that are included, and these should be determined as specific to each situation.

The number of shares that the investor is purchasing should be clearly states on the stock purchase agreement. The total amount that the investor purchases should equal the total dollar amount invested. Once the transaction is completed, the investor should receive a stock certificate to validate ownership of the stock or stocks. This information is important to the validity of the stock purchase. The stock certificate is a legal financial document that should be stored in a safe place with the stock purchase agreements in a fire safe location. This is a place where all important financial documents should be stored for safe keeping.

The warranties and representations of the seller and the purchaser are sections located on stock purchase agreements. These sections provide important information that states that the seller is legally and financial able to sell stocks or shares of their company to the investor that is purchasing these shares. This section also states that all necessary information has been fully disclosed and there are no omissions from the contract regarding the sale of shares to the investor. There should be signatures from witness that from each party who signed the document. These are all important sections that should be included in all stock purchase agreements.

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