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Stock Agreement
I need a stock agreement for issuing shares to a new investor, detailing the number of shares, price per share, and vesting schedule. The agreement should also include provisions for transfer restrictions, voting rights, and any anti-dilution protections.
What is a Stock Agreement?
A Stock Agreement sets out the rules and terms for buying, selling, or transferring shares in an Irish company. It spells out key details like share pricing, transfer restrictions, and shareholder rights - acting as a crucial safeguard for both the company and its investors.
These contracts are especially important for Irish private limited companies, where they help maintain control over share ownership and protect minority shareholders. Common elements include pre-emption rights, tag-along provisions, and specific conditions for share transfers in line with the Companies Act 2014. Many Irish startups and family businesses use these agreements to keep shares within a trusted group and manage company succession.
When should you use a Stock Agreement?
Stock Agreements become essential when bringing new shareholders into an Irish company or setting up rules for future share transfers. They're particularly valuable when starting a business with multiple founders, accepting investment from outside parties, or planning for company succession in family businesses.
The right time to put a Stock Agreement in place is before any shares change hands - ideally during company formation or just before a new investment round. This prevents disputes by establishing clear procedures for share valuation, transfer restrictions, and exit rights. It's especially critical for private companies looking to maintain control over ownership or protect minority shareholders under Irish company law.
What are the different types of Stock Agreement?
- Share Sale And Purchase Agreement: Standard agreement for straightforward share sales between parties, outlining price, payment terms, and warranties
- Share Transfer Agreement Private Company: Specifically designed for private Irish companies, with detailed transfer restrictions and pre-emption rights
- Business Shares Agreement: Comprehensive agreement covering ongoing shareholder relationships, voting rights, and management provisions
- Stock Redemption Agreement: Focuses on company buyback terms and procedures for share redemption
- Share Exchange Agreement: Used for share swaps between companies or during corporate restructuring
Who should typically use a Stock Agreement?
- Company Directors: Responsible for approving and executing Stock Agreements, ensuring they align with Irish company law and corporate strategy
- Shareholders: Both existing and incoming shareholders who must understand and comply with share transfer restrictions and rights
- Corporate Solicitors: Draft and review agreements to ensure compliance with Irish regulations and protect client interests
- Company Secretary: Maintains share registers and ensures proper documentation of transfers under the agreement
- Investment Firms: Use these agreements when investing in Irish companies, often adding specific terms for their protection
- Family Business Owners: Rely on these agreements to manage succession planning and keep shares within family control
How do you write a Stock Agreement?
- Company Details: Gather current shareholding structure, company registration number, and registered office address
- Share Information: Document share classes, total issued shares, and current market value
- Transfer Terms: Define pre-emption rights, transfer restrictions, and valuation methods for future sales
- Shareholder Rights: List voting rights, dividend entitlements, and board representation rules
- Exit Provisions: Specify drag-along and tag-along rights, plus conditions for share redemption
- Compliance Check: Ensure alignment with Irish Companies Act 2014 and company constitution
- Documentation: Prepare shareholder details, meeting minutes, and board resolutions for approval
What should be included in a Stock Agreement?
- Parties' Details: Full legal names, addresses, and company registration numbers of all involved entities
- Share Specifics: Clear description of share class, quantity, price, and payment terms
- Transfer Mechanics: Pre-emption rights, transfer restrictions, and valuation methodology
- Warranties: Standard representations about share ownership and authority to sell
- Governing Law: Explicit statement that Irish law governs the agreement
- Drag-Along Rights: Terms allowing majority shareholders to force minority participation in a sale
- Dispute Resolution: Clear procedures for handling disagreements under Irish jurisdiction
- Execution Block: Proper signature sections for all parties, including witness provisions
What's the difference between a Stock Agreement and a Stock Option Agreement?
A Stock Agreement differs significantly from a Stock Option Agreement in several important ways. While both deal with company shares, they serve distinct purposes under Irish company law.
- Basic Purpose: Stock Agreements govern immediate share ownership and transfers, while Stock Option Agreements create future rights to purchase shares at preset terms
- Timing of Rights: Stock Agreements transfer immediate ownership rights, whereas Option Agreements typically involve vesting periods and future exercise dates
- Common Users: Stock Agreements are used between current shareholders and buyers, while Option Agreements usually involve companies and their employees or contractors
- Legal Requirements: Stock Agreements must comply with immediate transfer regulations under the Companies Act 2014, while Option Agreements focus on future rights and often involve employment law considerations
- Tax Implications: Stock Agreements trigger immediate tax considerations, whereas Option Agreements have different tax treatment when granted versus exercised
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