A redemption agreement is a legal document drafted when an organization redeems its shares or leaves the business it is involved in. This usually happens when a company is undergoing losses or the business is not running smoothly.
The organization may also pass on the business to another organization resulting in change of ownership. It is a process of making the business transition smoother. As per the agreement the organization sets up a situation so that the shares or stake of it can be repurchased by the organization later.
There are few vital information required to be mentioned in a redemption agreement. They are as follows:
- The price at which the stock of the organization will be redeemed
- The business law under which the agreement is drafted
- The terms and conditions that both the parties entering into the agreement need to follow
- The termination date of the agreement
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