Stock Restriction Agreements symbolize the common purpose shared by stockholders in a company and the friction between the dual goals of wanting to find investors in, yet wanting to keep control of, a closely held corporation. The restrictions found in such agreement generally relate to the ability of a shareholder to transfer or sell his shares to those outside the company. Usually connected with larger-scale transactions such as mergers and acquisitions, these agreements limit a stockholder’s ownership rights in consideration for some service or financial compensation that is provided.

To ensure that control is maintained, sometimes a company will want to reserve the right to repurchase the shares that have been previously sold to outside investors. Here, the Company wants to reserve the right (but not obligation) to repurchase all or any portion of the Shares held by Investor X for a price per share equal to the Repurchase Price paid by cash, check, wire transfer, cancellation of indebtedness or some combination thereof. Thus, a company can coalesce the otherwise mutually exclusive goals of securing outside investment and ensuring control of the company’s day-to-day operations.

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