Common stock clause: Copy, customize, and use instantly
Introduction
A common stock clause outlines the rights, obligations, and terms related to the issuance, transfer, and ownership of common stock in a company. It typically addresses the distribution, voting rights, dividends, and conditions under which stock may be issued or transferred.
Below are templates for common stock clauses tailored to different scenarios. Copy, customize, and insert them into your agreement.
Standard common stock clause
This version covers the general issuance of common stock.
The [Company] agrees to issue [X] shares of common stock to the [Investor] at a price of [$Y] per share, subject to the terms and conditions of this Agreement. The common stock shall be subject to the rights and obligations set forth in the [Company]’s charter and bylaws.
Common stock clause with dividend rights
This version includes dividend rights.
The [Investor] shall be entitled to receive dividends on the common stock issued under this Agreement, in proportion to the number of shares held, when and if declared by the Board of Directors, subject to the [Company]'s dividend policy and applicable laws.
Common stock clause with voting rights
This version includes voting rights for common stockholders.
The holder of the common stock shall have the right to vote on all matters requiring stockholder approval, with each share of common stock entitling the holder to one vote.
Common stock clause with restrictions on transfer
This version restricts the transfer of common stock.
The holder of the common stock shall not transfer, assign, or sell any shares of common stock to a third party without the prior written consent of the [Company], except in accordance with the transfer restrictions outlined in the [Company]’s charter and applicable securities laws.
Common stock clause with preemptive rights
This version grants preemptive rights.
The holder of the common stock shall have the right to purchase a proportionate number of additional shares of common stock in any future offering of common stock by the [Company] to maintain their percentage ownership, subject to the terms and conditions of this Agreement.
Common stock clause with right of first refusal
This version grants the right of first refusal.
In the event that the holder of the common stock wishes to sell or transfer any shares, the [Company] and/or its shareholders shall have the right of first refusal to purchase such shares on the same terms as offered to a third party.
Common stock clause with redemption rights
This version includes redemption rights.
The [Company] shall have the right, but not the obligation, to redeem any outstanding common stock at a price determined by the Board of Directors, subject to the terms and conditions set forth in this Agreement.
Common stock clause with anti-dilution provisions
This version includes anti-dilution provisions.
In the event of a stock issuance by the [Company] at a price lower than the price paid by the [Investor] for common stock, the [Investor] shall be entitled to additional shares of common stock to maintain their proportionate ownership interest.
Common stock clause with board seat rights
This version includes board seat rights for common stockholders.
The holder of the common stock shall have the right to nominate one director to the Board of Directors of the [Company], which shall be subject to approval by the other stockholders as outlined in the [Company]’s bylaws.
Common stock clause with right to receive financial reports
This version provides access to financial reports.
The holder of the common stock shall have the right to receive the [Company]'s quarterly and annual financial statements, as well as any other reports or information regarding the financial condition of the [Company].
Common stock clause with liquidation preference
This version includes a liquidation preference.
In the event of a liquidation, dissolution, or winding up of the [Company], the holders of the common stock shall be entitled to receive the remaining assets of the [Company] after payment of all senior liabilities, on a pro-rata basis according to the number of shares held.
Common stock clause with restrictions on issuance
This version restricts the issuance of common stock.
The [Company] shall not issue any additional common stock without the consent of the majority of the existing common stockholders, unless such issuance is part of an approved equity financing or transaction.
Common stock clause with restrictions on stock buyback
This version restricts stock buybacks.
The [Company] shall not buy back or repurchase any shares of its common stock without the prior written consent of the majority of the common stockholders, except in accordance with a formally approved buyback program.
Common stock clause with right to inspect books
This version includes the right to inspect books.
The holder of the common stock shall have the right to inspect the books and records of the [Company], including financial statements, stockholder records, and meeting minutes, upon reasonable notice and during normal business hours.
Common stock clause with issuance of stock certificates
This version includes stock certificates issuance.
Upon issuance, the [Company] shall provide the holder of the common stock with a stock certificate reflecting their ownership interest in the [Company], subject to any restrictions on transfer set forth herein.
Common stock clause with drag-along rights
This version includes drag-along rights.
In the event that the majority of the common stockholders approve a sale or merger of the [Company], the holder of the common stock agrees to sell their shares on the same terms as the majority, pursuant to the drag-along rights of the [Company].
Common stock clause with tag-along rights
This version includes tag-along rights.
If a shareholder holding more than [X]% of the common stock of the [Company] agrees to sell their shares to a third party, the holder of the common stock shall have the right to sell their shares on the same terms, pursuant to tag-along rights.
Common stock clause with voting restrictions
This version includes voting restrictions.
The holder of the common stock shall be restricted from voting on matters related to mergers, acquisitions, or other transactions involving the [Company] unless the approval of a supermajority of common stockholders is obtained.
Common stock clause with transfer restrictions
This version restricts transfers.
The transfer of any shares of common stock shall be subject to the approval of the [Company] and may only be made in accordance with the transfer restrictions set forth in this Agreement, including applicable securities laws.
Common stock clause with no pledge or encumbrance
This version prohibits pledging or encumbering stock.
The holder of the common stock shall not pledge, assign, or otherwise encumber the shares of common stock without the prior written consent of the [Company], except as required by law.
Common stock clause with periodic stockholder meetings
This version includes periodic meetings.
The [Company] shall hold annual stockholder meetings at which the holders of common stock shall have the right to vote on the election of directors, approval of financial statements, and other matters as set forth in the [Company]’s bylaws.
Common stock clause with limitations on stockholder liability
This version limits stockholder liability.
The holder of the common stock shall not be liable for the debts or liabilities of the [Company] beyond the amount of their investment in the common stock, unless otherwise provided by applicable law.
Common stock clause with stockholder approval for corporate actions
This version requires stockholder approval.
The [Company] shall not undertake any major corporate action, including mergers, acquisitions, or asset sales, without the approval of a majority of the holders of the common stock, in accordance with the procedures outlined in the [Company]’s charter.
Common stock clause with disclosure of beneficial ownership
This version includes disclosure requirements.
The holder of the common stock agrees to disclose any beneficial ownership or control over the stock to the [Company], and to update such disclosure on an annual basis or as changes occur.
Common stock clause with buyout provisions for minority shareholders
This version includes buyout provisions.
In the event of a proposed sale of the [Company], the majority stockholders shall have the right to offer to purchase the shares of the minority stockholders at the same price offered by the third-party buyer.
Common stock clause with issuance of additional shares for capital raise
This version allows for additional share issuance.
The [Company] may issue additional common stock to raise capital, subject to the approval of the Board of Directors and compliance with the terms set forth in this Agreement.
Common stock clause with restrictions on stockholder actions
This version includes restrictions on actions.
The holder of the common stock agrees not to take any action that may harm the reputation or operational effectiveness of the [Company] or interfere with the rights of other shareholders.
Common stock clause with dividend reinvestment plan
This version includes a dividend reinvestment plan.
The [Company] offers a dividend reinvestment plan (DRIP) under which the holder of the common stock may elect to reinvest their dividends into additional shares of common stock at a discounted rate.
Common stock clause with minimum stock ownership requirement
This version requires a minimum stock ownership.
The [Investor] agrees to maintain a minimum ownership of [X]% of the common stock of the [Company] for a period of [X] years from the date of issuance, or until the occurrence of an exit event.
Common stock clause with limitations on stock buybacks
This version limits buybacks.
The [Company] may only repurchase its common stock from existing shareholders in accordance with the stock buyback program authorized by the Board of Directors, and such buybacks shall be subject to the availability of funds.
Common stock clause with right to convert to preferred stock
This version allows conversion to preferred stock.
The holder of the common stock shall have the right, at any time, to convert their common stock into preferred stock at a ratio to be determined by the Board of Directors, subject to applicable laws and regulations.
Common stock clause with redemption price adjustment
This version includes redemption price adjustment.
In the event of a merger or acquisition of the [Company], the redemption price of the common stock shall be adjusted to reflect the value of the [Company] based on the transaction terms, and may include a premium.
Common stock clause with third-party rights to stock
This version allows third-party rights.
The [Customer] acknowledges that the common stock issued under this Agreement may be subject to third-party rights, including rights of first refusal or preemptive rights, and agrees to comply with such rights.
Common stock clause with additional rights upon IPO
This version includes additional rights in an IPO.
Upon an initial public offering (IPO), the holders of common stock shall have the right to participate in the offering on a pro-rata basis, subject to the conditions established by the underwriters.
Common stock clause with stockholder consent for transfer to affiliates
This version allows transfer to affiliates with consent.
The holder of the common stock may transfer shares to affiliates, provided the [Company] gives prior written consent, and the transferee agrees to be bound by the terms of this Agreement.
Common stock clause with stockholder approval of material transactions
This version requires stockholder approval.
Any sale, merger, or other material transaction involving the [Company] that would result in a change in the ownership structure must be approved by a majority vote of the holders of common stock.
Common stock clause with restriction on short-selling
This version restricts short-selling.
The holder of the common stock agrees not to engage in short-selling or any other market activity that would artificially depress the price of the [Company]'s stock.
Common stock clause with provision for stock buybacks during financial difficulty
This version allows stock buybacks in financial difficulty.
In the event of significant financial difficulty or liquidity constraints, the [Company] may engage in limited stock buybacks at the discretion of the Board of Directors to stabilize the stock price, subject to applicable laws.
Common stock clause with tax reporting requirements
This version includes tax reporting requirements.
The [Company] will provide the holder of the common stock with any necessary tax reporting forms related to dividends or capital gains for tax reporting purposes in compliance with applicable tax laws.
Common stock clause with mandatory offer to minority stockholders
This version includes a mandatory offer to minority stockholders.
In the event of a majority shareholder acquisition, the majority shareholders must make a mandatory offer to purchase the shares of minority stockholders at a fair market value determined by an independent valuation.
Common stock clause with special voting rights
This version provides special voting rights.
The holder of the common stock shall have special voting rights in the event of a major transaction, including mergers, acquisitions, or changes in the governing structure, as outlined in the [Company]’s bylaws.
Common stock clause with restriction on foreign ownership
This version restricts foreign ownership.
The holder of common stock agrees that no more than [X]% of the total outstanding common stock may be held by non-U.S. entities or individuals, unless the [Company] complies with applicable foreign ownership laws.
Common stock clause with issuance of warrants
This version includes the issuance of warrants.
In connection with the issuance of common stock, the [Company] may issue warrants to purchase additional shares of common stock at a price and terms determined by the Board of Directors.
Common stock clause with requirement for preemptive rights
This version requires preemptive rights.
The holder of the common stock shall have the preemptive right to purchase additional shares of common stock in any future offering, on a pro-rata basis, to maintain their ownership percentage.
Common stock clause with change in conversion rights upon IPO
This version includes conversion rights in an IPO.
In the event of an IPO, the holder of common stock shall have the right to convert their shares into public shares, subject to the terms and conversion ratios set forth by the [Company].
Common stock clause with right of withdrawal for stockholders
This version allows withdrawal rights.
The holder of common stock shall have the right to withdraw their investment from the [Company] in the event of a material breach of this Agreement or a failure by the [Company] to perform its obligations under this Agreement.
Common stock clause with lock-up period following IPO
This version includes a lock-up period.
Following the IPO of the [Company], the holder of the common stock agrees to a lock-up period of [X] months, during which time they shall not sell or transfer their shares without the prior written consent of the [Company].
Common stock clause with commitment to equity offering
This version commits to an equity offering.
The [Company] agrees to offer additional equity to the [Investor] in any future capital raise, subject to the terms and conditions to be agreed upon in good faith by the parties.
Common stock clause with right to receive stock splits
This version includes rights to stock splits.
In the event that the [Company] undergoes a stock split, reverse stock split, or similar corporate action, the holder of common stock shall receive additional shares or be adjusted to maintain the proportional value of their investment.
Common stock clause with minimum purchase requirement
This version includes a minimum purchase requirement.
The holder of common stock agrees to purchase a minimum number of shares as set forth in this Agreement, with any unpurchased shares being subject to reallocation or cancellation.
Common stock clause with conversion rights in the event of liquidation
This version allows conversion in the event of liquidation.
In the event of liquidation or winding up of the [Company], the holder of common stock shall have the right to convert their shares into a preferred class of shares to receive priority in the distribution of remaining assets.
Common stock clause with rights to stockholder's meeting
This version provides rights to stockholders' meetings.
The holder of common stock has the right to attend and participate in stockholder meetings, vote on matters requiring stockholder approval, and receive all information necessary to make informed decisions.
Common stock clause with restriction on competing business investments
This version restricts competing business investments.
The holder of common stock agrees not to invest in or operate a business that directly competes with the [Company] during the term of this Agreement and for [X] years thereafter.
Common stock clause with guaranteed rights to dividends
This version guarantees dividend rights.
The holder of common stock shall be guaranteed rights to receive dividends, subject to the discretion of the Board of Directors, and based on the [Company]’s earnings and financial performance.
Common stock clause with change of control provisions
This version includes change of control provisions.
In the event of a change of control of the [Company], the holder of common stock shall have the right to request a buyout of their shares at a fair market value, subject to the terms of this Agreement.
Common stock clause with stockholder consultation rights
This version includes consultation rights.
The [Company] agrees to consult with the holders of common stock on significant business decisions, such as mergers, acquisitions, or changes in business strategy, and shall take stockholder input into consideration.
Common stock clause with restrictions on certain stock transfers
This version restricts certain stock transfers.
The holder of common stock agrees not to transfer any shares to competitors of the [Company], affiliates of competitors, or entities involved in similar industries without the express written consent of the Board of Directors.
Common stock clause with commitment to re-offer shares to stockholders
This version requires re-offer of shares.
The [Company] agrees to offer any new issuance of common stock to the holders of existing common stock on a pro-rata basis before offering the shares to external investors.
Common stock clause with provision for equity distribution to employees
This version includes equity distribution to employees.
The [Company] agrees to establish an employee equity plan, under which common stock may be issued to employees, subject to the terms and conditions established by the Board of Directors.
Common stock clause with modification rights for stockholder agreements
This version allows modification of stockholder agreements.
The parties agree that any stockholder agreements related to the common stock issued under this Agreement may be modified by mutual consent in writing to address changes in the ownership structure or operational needs of the [Company].
Common stock clause with restriction on issuance of new classes of stock
This version restricts the issuance of new stock classes.
The [Company] shall not issue any new class of stock that would alter the relative rights or preferences of the common stock without the approval of the majority of common stockholders.
Common stock clause with right to assign shares to heirs
This version allows assignment to heirs.
The holder of common stock may assign or transfer their shares to heirs, beneficiaries, or legal representatives, subject to the terms and conditions outlined in this Agreement.
Common stock clause with required filings for public stock
This version requires filings for public stock.
The [Company] agrees to comply with all securities laws and regulatory filing requirements in connection with any public offering or registration of its common stock.
Common stock clause with requirement for approval of stock sales
This version requires approval for stock sales.
The sale or transfer of any common stock issued under this Agreement shall require prior approval from the Board of Directors, with any transfer subject to the restrictions set forth in this Agreement.
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.