Buzz Archive:
The Contract - Purchase Agreement, Shareholders Agreement, And Rights Of First Refusal

by Joseph W. Bartlett, Of Counsel, Sullivan & Worcester LLP and Founder of VC Experts.com, 10/14/2009

The term sheet, in time, segues into a formal agreement. The understandings between the parties (as set out in the term sheet or simply by oral agreement) may be primitive: "Here's some cash, give me some stock." Nonetheless, any deal involving the sale of securities is legally complex because the law views that category of transaction in a special way; lawmakers and regulators, based on historical evidence going as far back as the South Sea Bubble, entertain deep concerns that there exist unusual opportunities for fraud and overreaching when the commodity traded is a security. Accordingly, the simplest investment contract—"one share, one dollar"—is in reality far from simple, since the agreement of the parties is complemented by rules imposed by statute and administrative regulation.

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