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Simple English definitions for legal terms
underwriting agreement
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A quick definition of underwriting agreement:
An underwriting agreement is a contract between a company and a financial institution that outlines the terms and conditions of a new securities issue. This agreement helps the company raise money by selling its securities to investors. It is important for both parties to agree on the terms of the agreement before the securities are sold.A more thorough explanation:
An underwriting agreement is a type of agreement between a company and an underwriter. It outlines the terms and conditions of a new securities issue. This agreement is important because it helps the company raise money by selling its securities to the public.
For example, if a company wants to issue new stocks, it may enter into an underwriting agreement with an investment bank. The investment bank will buy the stocks from the company and then sell them to the public. The underwriting agreement will specify the price at which the investment bank will buy the stocks and the price at which it will sell them to the public.
Overall, an underwriting agreement is a crucial part of the process of issuing new securities. It helps the company raise money and ensures that the underwriter is compensated for its services.