Shares are fixed capital units that represent the stake that a member has in an organization. An individual or organization that holds shares in an organization is referred to as a shareholder in the organization. This individual has the right to transmit and transfer their shares to another person that they deem fit.
However, they can only transfer the number of shares they have and not more. To transfer the shares the shareholder has to complete a share transfer agreement doc. To make the process more seamless, you can choose to use a share transfer agreement template.
What Is A Stock Transfer Agreement?
A stock transfer agreement is a standard legal document required for the sale or transfer of a company’s share. It is often used by shareholders when they decide to transfer or sell their shares in a company to another party. The document outlines the specific particulars of the party transferring or selling their shares to another party.
The selling or transferring party is known as the transferring or selling party is known as the transferee. Apart from the details of the transferor, the share transfer agreement also states the number of shares to be sold or transferred as well as the value or cost of each share.
The details of the transferee are also included in the transfer of shares agreement. It is important to mention that there are two major types of shares that a shareholder can transfer. These are ordinary shares and preference shares. In terms of priority, the ordinary shares rank lower.
This is because the ordinary shareholders do not receive a fixed amount of money, which is paid as dividends, from the company. Additionally, if a company winds up, the preference shareholders first get paid before the ordinary shareholders.
Why do you need a Stock Transfer Agreement?
If you are a shareholder of an organization and you would like to sell or transfer your shares to another party, you would need to complete a share transfer agreement doc. This document is a legal document that states the details of the share transfer. Drafting stock transfer agreements can be a bit technical.
It contains some legal and business jargon that you may not require that you engage the service of a professional attorney. If you do not want to invest significantly in the service of an attorney, you can choose to use a template.
A share transfer agreement template contains the basics that are required in the share transfer document. All you have to do is customize the content to suit your specific needs. There are reputable websites that you can explore to find the perfect template that works for you.
You may want to check CocoDoc for an editable sunoke stock transfer agreement that you can use for your stock transfer.
What should be included in a Stock Transfer Agreement?
Shares are highly regulated by both the local and federal governments. Therefore, it is important that a share transfer agreement pdf strictly adheres to the applicable laws and regulations for the sale and transfer of shares.
If a portion of the agreement is found to violate any federal or state laws, the agreement may be rendered invalid. Therefore, all aspects of the document should be factual and accurate.
To ensure that all aspects are adequately covered, it is recommended that you use the share transfer agreement between shareholders template. Whether you are using a template or writing your agreement from the scratch, the details that should be included are:
- Name and location of the company
- The name and details of the purchaser
- The value of the stock per share
- The number of shares that are being sold
- The date and time of the transfer transaction
- The address of the sale
- Warranties created by both the seller and purchaser
- General provisions
- The total price of the purchase and the financial stipulation
- Details of witnesses
- Articles pertinent to the transaction
- The termination clauses
A comprehensive stock transfer agreement should contain these details. However, there may be an abridged version that contains only the basics.
Common Mistakes to Avoid When Drafting a Stock Transfer Agreement
As mentioned earlier, share transfer is strictly regulated by the government. Anything that represents fraudulent intention, whether done intentionally or unintentionally may render the agreement invalid.
Therefore, you should avoid any error when drafting a stock transfer agreement. Here are some common mistakes that you need to avoid when writing your transfer agreement:
- Ambiguity and unclearly defined terms: A share transfer agreement must be devoid of any ambiguous content. All terms should be well-defined and clearly understood by parties.
- Not Reviewing transfer of shares agreement with a lawyer: It is tempting to draft a contract and conclude the transfer of shares without getting it reviewed by a lawyer. However, it is better to have your lawyer review your share transfer agreement pdf to avoid any unpleasant surprises.
- Not referencing the capital dividend account: When the capital dividend account is not referenced and no clause refers to the payment of the capital dividend, the client may not receive the expected tax benefits. This is especially the case if the shares are funded with corporately owned life insurance.
These are some of the common mistakes that you should avoid when writing a share transfer agreement.
A stock transfer agreement template is a faster and easier way of getting things done. You do not have to draft the contract from scratch because you can customize an already created template to suit your needs.
However, it is strongly recommended that you share the share transfer agreement document with your lawyer for professional review and approval. This will prevent any issues that may arise in the future. Additionally, both parties involved in the agreement should carefully review the document before appending their signatures.