It’s not uncommon for a corporation to buy back its shares from shareholders. Most commonly, this is done to boost the stock value.
When a corporation buys back its shares, it will use a Share Repurchase Agreement. This document serves this specific purpose and aims to ensure that both the buyer and the seller are protected.
The Share Repurchase Agreement is necessary regardless of how the actual repurchase is to be executed. There are several methods a corporation can go about in repurchasing its shares.
It can announce the buyback on the open market, but it can also hold private negotiations with the shareholders. A self-tender offer is a way to repurchase shares by offering a price that’s higher than the value they’re currently traded.
Finally, there’s the Dutch Auction repurchase, where the corporation specifies a price range.
Depending on your state, a Share Repurchase Agreement may also be known as:
A corporation looking to buy back its shares will need a Share Repurchase Agreement. If you think your corporation’s shares are undervalued, you can repurchase some of them and increase the value. Another example will be if a corporation wants to reduce the dilution or acquire more voting rights.
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Share Repurchase Agreement is to be signed by the corporation authorized representative, usually the secretary, and the seller or representative. It is customary to have witnesses to the signature, but notarization is not required.
After signing, the Share Repurchase Agreement should be distributed to the seller and the corporate representative. For the latter, it would be recorded in the corporation’s stock ledger.
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