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In stock purchases, the buyer acquires all of the outstanding stock of the target company directly from the target company’s stockholders. By doing so, the buyer acquires all the assets, rights, and liabilities of the target company as a matter of law. This is fundamentally different from an asset acquisition where the buyer only acquires the assets and liabilities it identifies and agrees to acquire and assume.


Stock purchases are good for a buyer wishing to acquire a going concern. However, there is the risk that the buyer will be assuming unknown or undisclosed liabilities of the target company, despite adequate due diligence. Buyers often try to shield themselves from such liabilities by maintaining the target company as a separate subsidiary or by negotiating certain contractual provisions into the stock purchase agreement, such as indemnities and escrow provisions. These measures may not completely protect a buyer but they can minimize the impact of these liabilities.

If you are considering buying a company or selling your company, contact one of our attorneys to help you plan the best way to protect your interests and maximize the value you receive.

Worth JarrelL is an Atlanta-based law firm committed to giving our clients sophisticated, professional, and impassioned representation to ensure success in their endeavors. Contact us today to schedule a meeting with one of our Attorneys.



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