An equity purchase agreement is a legal contract between a company and its stockholders, containing details of the number of shares or equity purchased, the cost of each share, the period for which the agreement is valid, the mode of payment and so on. The equity purchase agreement is legally binding and therefore the terms and conditions of the contract must be read carefully.
There are primarily two kinds of equity purchase agreements, restricted and non-restricted. Most equity purchase agreements are non-restricted and hence the buyer can do whatever he wants with the stocks he purchases. He becomes the owner in a sense and there is no restriction on the use of the stocks within the ambit of the law. In case of restricted equity purchase agreements, the co-founder owns part of the stock and he is bound to sell the stock periodically. This ensures that a co-founder does not leave the company with a majority chunk of the stock.
Equity Purchase Agreement
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