A redemption agreement usually refers to stock redemption agreement made by a company and its shareholders to buy back shares in return for cash. After the stock has been purchased, it is entered into the company’s treasury stock account. Proper accounting must be done to record the transaction process to keep a record of the date of purchase of stock and the amount of money paid by the company to buy those shares. Other information to be mentioned in the redemption agreement includes mention of the number of stocks bought by the corporation and the purchase price.
A redemption agreement also refers to a document which is created in case the owner of a business passes away or leaves the company. The agreement states that once the owner leaves or dies, his shares will be bought by the company for a particular price. If the owner dies, the agreement may also state that the life insurance money of the owner be used to buy the stocks
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