A stock purchase agreement is a contract for buying and selling shares or other equity interests in a company.
Why a stock purchase agreement matters
A stock purchase agreement matters because buying shares can transfer ownership of the company itself, including its assets, contracts, liabilities, and ongoing obligations unless the agreement or law provides otherwise. The agreement often includes representations, warranties, covenants, closing conditions, and indemnification.
The structure can affect diligence and risk allocation.
Where a stock purchase agreement appears
Stock purchase agreements appear in private-company acquisitions, shareholder buyouts, startup financing, ownership transfers, merger-and-acquisition diligence, and business succession planning.
Practical example
A buyer purchases all outstanding shares of a corporation from its shareholders. The corporation continues to own its assets and contracts, but control of the corporation changes.
How a stock purchase agreement differs from nearby terms
A stock purchase agreement differs from an asset purchase because it transfers equity interests rather than selected assets. It differs from a merger because a merger combines entities by statutory process.
Related terms
Quick knowledge check
Why can a stock purchase carry different liability concerns than an asset purchase?