Stock Pledge Agreements

A stock pledge agreement is an independent contract signed by a buyer and seller of a business when the full purchase price is not paid at closing. It compliments an interest purchase agreement and is used when a portion of the purchase price is held back or earned out by the buyer. It is customarily signed a closing immediately after an interest purchase agreement.

A pledge agreement allows a third party, usually a lawyer or accountant, to hold the actual stock certificates to ensure that the interest purchased through the sales agreement do not actually pass to the purchaser until the full amount of the purchase price is received. While the interest purchaser normally retains the rights to vote the stock while the third party holds it, the buyer ordinarily cannot encumber the stock with debt or otherwise contract to sell it.

Stock pledge agreements, employment agreements, promissory notes, and corporate resolutions are all documents that our experienced small business lawyers employ to protect our clients during a business sale/purchase.