What is a Warrant Agreement Review?
A warrant agreement is a document that specifies that one party is allowed to buy a company’s stock at a certain price. A warrant agreement can be a call warrant, in which shares are purchased at a certain price in the future; or a put warrant, when a party has the right to sell back shares at a specific price in future.
After a warrant agreement has been drafted, it’s essential for both parties to review it closely for any issues.
Read the rest of this article to explore what a warrant agreement contains, how to review it yourself for accuracy, and when to consult with a lawyer for a professional, thorough review.
What Information is in a Warrant Agreement?
A warrant agreement contains important information that governs the selling of stock. Since it has many details that directly affect how much money you can make, it shouldn’t be taken lightly. Here are some key terms included in the contract.
- Purchase of shares. This states that the warrant holder is allowed to buy a certain amount of shares from the company, which must be clearly described. The price per share must also be included.
- Exercise period. This refers to the term of the agreement, which starts when the warrant is issued and ends on a specific date.
- Issuance of shares. The company agrees to issue the shares during the exercise period.
- Notice of adjustment. If any changes are made to the number or type of shares, the company agrees to notify the holder.
- Stockholder rights. The agreement specifies that the warrant holder won’t be entitled to vote, hold shares, or have other securities.
- Notice of exercise. The warrant holder agrees to purchase a certain number of shares that need to be specified. The agreement might also include information about how the payment will be made.
How Should You Review a Warrant Agreement?
There are some important key terms to check when reviewing a warrant agreement. Here they are, as well as some tips to review your document thoroughly.
Cover the Basics
Start by ensuring the agreement covers all the basic information about what the warrant allows you to do, the exercise price you’ll pay per share, and the expiry date.
Check for Protections
You want to see what’s at risk, such as by checking if you’ll be protected if the company issues new shares at a reduced price. Notices of adjustment need to be clearly defined for clarity.
Read the Termination Clause
The agreement’s termination clause is essential to review because it could have serious implications, such as if you’re forced to exercise earlier than intended.
Confirm Transferability
If you’d like to transfer the shares, you need to ensure that the agreement allows you to do so. Check if any approvals are required prior to transferring shares or if there are limitations. If anything is vague, that’s a red flag.
Check the Governing Law
The governing law and jurisdiction clause is important because rules vary in different places. If there’s a dispute with the other party, this section of the agreement will also play a role by determining how to resolve them.
Ensure You Understand Everything
One of the most important things to do when reviewing the contract is to check that you understand all terms and clauses. If there’s anything unclear or confusing, you should discuss it with the other party so that you gain clarity.
Should You Request a Legal Review of Your Warrant Agreement from a Lawyer?
Although you might think you don’t need to hire a lawyer for a review of your warrant agreement, it’s advisable. A lawyer doesn’t just read through the contract during a review. They will identify things that most people will miss, such as hidden risks. These include one-sided terms that favor the other party.
Other ways in which a lawyer can help you by reviewing your contract include the following:
- They’ll check all your duties and rights to protect you against future disputes that can be time-consuming and expensive.
- They’ll translate legal language that can be challenging to understand so that you have clarity about the entire agreement.
- They’ll think about future consequences. For example, they’ll identify potential losses if there is an acquisition or other situation.
- They’ll negotiate for a more balanced and favorable agreement. A lawyer can suggest specific revisions, push back on any unfair terms, and use their knowledge of what can be negotiated for a successful outcome.
- They’ll ensure the agreement complies with all relevant laws so that it’s enforceable.
- They’ll consider the agreement against market standards, since they have years of experience in reviewing these and other contracts.
- They’ll interpret vague or broad language that can be misleading or cause you issues later.
By having a thorough legal review, you’ll get peace of mind that you’re accepting fair, reasonable, and enforceable terms to protect your interests.
Where to Get a Legal Review of Your Warrant Agreement
If you would like to work with a lawyer for a legal review of your agreement, you should look for a professional lawyer on an online legal platform like ContractsCounsel. This is one of the largest online legal marketplaces that connects clients with lawyers who have been vetted on the platform. All lawyers on the platform are qualified and have years of experience in helping clients with contract review and drafting.
To request a review of your warrant agreement, here are the easy steps to follow.
1. Go to the ContractsCounsel marketplace. Post your project for free, including a few details of what you require.
2. Wait to receive lawyer bids. You’ll receive multiple bids from lawyers on the platform who can assist you.
4. Once you receive the lawyer bids, you should review the lawyers' profiles. There’s lots of info on the platform to help you choose the best lawyer, such as their location, years of experience, field of expertise, and client ratings.
5. Select the best lawyer for your purposes and hire them.
