Delivery of shares: Overview, definition, and example
What is delivery of shares?
Delivery of shares refers to the transfer of ownership of shares in a company from one party to another, typically as part of a sale, investment, or corporate transaction. This process involves completing all necessary legal and administrative steps to ensure the buyer or recipient is recognized as the owner of the shares.
Why is delivery of shares important?
Delivery of shares is important because it formalizes the transfer of ownership rights, including voting power, dividend entitlements, and other shareholder privileges. For the buyer or recipient, it ensures legal recognition as a shareholder in the company. For the seller, it confirms that the transaction is complete and their obligations regarding the shares have been fulfilled.
Clear terms for delivery of shares in a contract help prevent disputes and ensure the transaction complies with applicable laws and corporate procedures.
Understanding delivery of shares through an example
Imagine an investor agrees to purchase 1,000 shares in a tech startup. The delivery of shares clause in their agreement specifies that the seller must transfer the shares to the investor’s account within 10 business days after payment. This ensures the investor becomes the legal owner of the shares promptly after completing their payment.
In another example, a company issues shares to its employees as part of an incentive program. The delivery of shares clause outlines that the shares will be delivered electronically to the employees' brokerage accounts within a specific timeframe after vesting conditions are met.
An example of a delivery of shares clause
Here’s how a delivery of shares clause might appear in a contract:
“The Seller agrees to deliver the Shares to the Buyer within [Insert Timeframe] following receipt of the Purchase Price. Delivery shall be completed by transferring the Shares to the Buyer’s designated account, free and clear of any liens, claims, or encumbrances.”
Conclusion
Delivery of shares ensures the smooth and legally compliant transfer of ownership in a company. It provides clarity and protection for both the buyer and the seller by defining the timeline, method, and obligations for completing the transaction. Including a clear delivery of shares clause in contracts helps prevent disputes, ensures transparency, and supports the efficient execution of share transactions.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.