Purchase and Sale of Private Shares
A Purchase and Sale of Private Shares is a written legal document that can be used in well, by definition, the purchase and Sale of private shares. This is a form that needs to be filled out. The form contains:
- The name of the first person, referred to as the seller
- The name of the second person, referred to as the purchaser
- The agreement, which in turn contains:
- The number or classification of the shares of a certain stock issued by a certain company or individual
- A promissory note stating the amount that will be payed as a security or collateral and a pledge of the stock
The shares that will be purchased will and are not registered with any and all of the United States Securities and Exchange Commision, or the Securities Commission of any and all states.
The Purchaser must have credentials and show that he or she is qualified under any and all relevant rules and regulations of the United States Securities and Exchange Commission and the Securities Commission of any state. The Purchaser must further state that he or she is not purchasing said shares for the purpose of re-sale and that the purchaser understands that because of the inclusion of private securities, there is a certain substantial risk.
The Purchaser shall accept counsel and can also consult with the advisors of their choice.
If the Purchaser agrees to any and all terms of the aforementioned document then he or she will have to sign the paper stating:
- The city he or she lives in
- It’s state
- The date signed
- And Finally, the name and signature of both the purchaser and the seller
You are encouraged to keep multiple signed copies in safe places such as a safe itself or a safe deposit box.
Purchase & Sale Of Private Shares
Purchase & Sale of Private Shares
__________, referred to as SELLER, and ______________, referred to as PURCHASER, agree:
PURCHASER shall purchase from SELLER ___ shares of Class ___ shares of ______ stock, issued by _________________________, in consideration of:
A promissory note in the amount of $________(______________& ___/100 dollars) secured by a pledge of the stock and/or $_____ (______________&___/100 dollars.)
The shares purchased are not registered with the United States Securities and Exchange Commission, or the Securities Commission of any state.
The PURCHASER represents that it is qualified under the relevant rules and regulations of the United States Securities and Exchange Commission and the Securities Commission of any state, which may have jurisdiction to purchase these shares. Purchaser represents they are an accredited investor or investment group as defined by current investment US and state laws.
The PURCHASER further represents that it is not purchasing these shares with an intention of resale, nor will it take any actions that may result in it being considered an underwriter of the shares.
Purchaser understands that as private securities this is a speculative investment with substantial risk that it is willing to undertake even though it may lead to a total write-off of this investment in question.
Prior to any transfer of these shares, the PURCHASER shall provide to the issuer of the stock a legal opinion, in a form acceptable to the counsel for the issuer, that the transfer will not result in the loss of the exemptions from registration of the securities then claimed by issuer.
The PURCHASER further represents that it has had adequate opportunity to obtain any information relevant to the decision to purchase, and has also had adequate opportunity to consult with advisors of their choice.
The PURCHASER agrees to execute the Shareholders Agreement dated ________________ as a condition of this purpose and herein ratifies its total acceptance of that Agreement.
This is the entirety of the agreement between the parties. Any disputes must be brought in the city of __________ in the state of _______________, and no other.
Dated: ____________________________
_________________________________________________
Purchaser
_______________________________________________
Seller
Purchase & Sale of Private Shares
Review ListThis review list is provided to inform you about this document in question and assist you in its preparation. The purchase of private shares is fraught with difficulty for a purchaser yet offers the greatest upside potential at the same time. This document is intended to underscore the risk as well as the professionalism of the investor to insulate the company and the selling shareholder from litigious attack. If you are the purchaser, be sure to accept the risk and understand the consequences before voyaging into these waters. Legal documents rarely result in any financial recovery so be doubly sure you want to make the investment.
1. Make multiple copies. Give one to each signatory and keep one copy with the transaction file.
Frequently Asked Questions
What is a purchase and sale of private shares agreement?
A purchase and sale of private shares agreement is a contract between a seller and a purchaser for the transfer of shares that are not registered with the SEC or state securities commissions. The agreement outlines the number and class of shares, the consideration (such as a promissory note or cash), and representations from the purchaser regarding their investor status and investment intent. It is used to document the private sale of securities.
What does it mean that the shares are not registered with the SEC?
It means the shares have not been registered under federal securities laws or with any state securities commission. As a result, they are subject to restrictions on resale and can only be sold under certain exemptions. The purchaser must meet specific qualifications to buy them legally.
Who can purchase private shares?
The purchaser must represent that they are qualified under relevant SEC and state rules to purchase the shares. They must also represent that they are an accredited investor or investment group as defined by current US and state investment laws. This ensures compliance with securities regulations.
What is an accredited investor?
An accredited investor is a person or entity that meets certain income or net worth thresholds as defined by US securities laws. The agreement requires the purchaser to represent that they qualify as an accredited investor or investment group. This status allows them to participate in private securities offerings.
Can I resell private shares after purchase?
The purchaser represents that they are not buying the shares with the intention of resale. They also agree not to take actions that would make them considered an underwriter of the shares. Therefore, resale is restricted and may require registration or an exemption.
What is a promissory note in a private share purchase?
A promissory note is a written promise to pay a specified amount, which can be used as consideration for the shares. In this agreement, the promissory note may be secured by a pledge of the stock. This means the seller can take back the shares if the note is not paid.
What does it mean if the shares are secured by a pledge?
If the shares are pledged as security for a promissory note, the seller has a claim on the shares if the purchaser defaults on payment. This protects the seller's interest in the transaction. The pledge is part of the consideration terms.
What representations does the purchaser make in this agreement?
The purchaser represents that they are qualified to purchase the shares under SEC and state rules, that they are an accredited investor or investment group, and that they are not buying with the intention of resale. They also represent that they will not act as an underwriter. These representations are intended to comply with securities laws.
Why is it important to state the class of shares?
The class of shares determines the rights and privileges associated with the stock, such as voting rights and dividends. The agreement specifies the class to clearly identify what is being sold. This helps avoid ambiguity in the transaction.
What happens if the purchaser is not an accredited investor?
The agreement requires the purchaser to represent that they are an accredited investor or investment group. If they are not, they may not be qualified to purchase the shares under the relevant securities laws. The transaction could be invalid or subject to penalties.
