An equity purchase agreement, also called a share or stock purchase agreement, transfers ownership in a company from a seller to a buyer. It aligns stakeholders with the company’s growth: as value increases, so does each holder’s equity.
Unlike asset purchases, which sell specific property, equity deals transfer ownership interests directly. They require thorough legal due diligence: verifying ownership, compliance, liabilities, and representations before any shares change hands.
In a domain-for-equity deal, the same principles apply. The domain functions as the asset exchanged for equity, and both parties must verify what they are transferring. One of the most critical components of this process is legal due diligence, a comprehensive review that evaluates legal risks, confirms ownership and authority, and ensures compliance with applicable law.
Below is a dual-sided examination of the legal structure, verification, and compliance considerations governing domain-for-equity contracts for both the domain owner and the company issuing the equity.
Define the Asset Clearly
Domain Owner Obligations
1. Identify precisely the domain(s) being transferred.
2. Specify whether associated goodwill, trademarks, DNS configurations, website content, or data are included.
3. Clarify if the transfer covers registration rights only or full operational control (DNS, hosting, SSL, analytics).
4. Provide registrar name, account ID, and confirm ability to generate EPP/Auth codes.
Company Obligations
1. Verify that the asset description matches registrar and registry records.
2. Confirm that the domain name and related assets align with the intended brand, project, or trademark.
3. Test technical feasibility of migration and hosting before closing.
Title, Ownership & Encumbrances
Domain Owner Obligations
1. Represent and warrant that they are the sole legal and beneficial owner of the domain(s) and authorized to transfer them.
2. Provide documentary proof of ownership: registrar statement, authorization code, or registrar confirmation.
3. Disclose all liens, co-ownership, brokers’ rights, pending sales, or encumbrances.
4. Disclose all past or ongoing UDRP, URS, or other disputes.
5. Verify the company’s ownership and authority before accepting equity by:
• obtaining incorporation certificate or business-registry extract;
• reviewing the current cap table and shareholder list;
• confirming board or shareholder approval of the equity issuance;
• confirming the company is in good standing and not under insolvency or legal restraint.
Company Obligations
1. Confirm the domain name owner’s title by obtaining registrar or escrow verification (WHOIS alone is not proof).
2. Conduct independent checks for prior UDRP filings, registry suspensions, or trademark conflicts.
3. Prove company ownership and equity authority by providing certified incorporation and good-standing documents, board resolutions, and confirmation that the shares offered are validly authorized, fully paid, and unencumbered.
4. Complete the issuance only after domain ownership and authority are verified in writing.
Consideration Structure (Equity or Cash and Equity Hybrid)
Domain Owner Obligations
1. Agree in writing to the compensation structure.
2. If accepting equity, supply details required for share issuance and understand share class, rights, and restrictions.
3. Seek assurance that the valuation used for the equity portion is accurate and consistent with the company’s last financing round or fair-market assessment.
Company Obligations
1. Approve the transaction formally by board resolution.
2. Comply with securities laws (e.g., Reg D, Reg S, or local equivalents).
3. Specify valuation method and record the domain’s fair value as an acquired intangible asset.
4. Deliver executed share certificates or electronic confirmation on closing.
Representations & Warranties (Scope & Survival)
Domain Owner Obligations
1. Warrant that:
• the domain has not been used for unlawful or infringing purposes;
• there are no pending registry actions or third-party claims;
• all disclosures are accurate.
2. Maintain these warranties for agreed survival periods (title/IP warranties often indefinite).
3. Confirm that company representations on equity issuance and corporate compliance are true before closing.
Company Obligations
1. Represent that it has full corporate power and authority to issue equity, that all shares are validly issued and free of restriction other than disclosed.
2. Warrant compliance with securities and corporate laws.
3. Provide reciprocal survival and indemnity obligations.
4. Review and rely on domain-side warranties before completing issuance.
Closing Conditions & Deliverables
Domain Owner Obligations
1. Deliver EPP/Auth codes, registrar transfer confirmation, and assist with DNS delegation.
2. Execute any IP-assignment or transfer documentation required.
3. Confirm no registrar locks or disputes at closing.
4. Verify that share certificates or equity confirmations have been executed and authorized.
Company Obligations
1. Deliver executed share or unit certificates and board approvals.
2. Provide evidence of filing and share-register update.
3. Confirm completion of any securities filings or regulatory consents.
4. Verify domain transfer completion via registrar records before finalizing payment.
Escrow & Indemnification
Domain Owner Obligations
1. Place the domain in escrow or temporary registrar hold until equity issuance is confirmed.
2. Indemnify the company for losses arising from ownership defects or pre-closing misuse.
Company Obligations
1. Deposit equity instruments or cash in escrow pending domain transfer verification.
2. Indemnify the domain owner for misrepresentation of corporate authority or failure to issue shares.
3. Establish thresholds, caps, and carve-outs (fraud and intentional misconduct excluded).
Dispute Resolution & Governing Law
Mutual Obligations
1. Choose a neutral, enforceable jurisdiction (e.g., Delaware, California, England) and specify arbitration as the default method.
2. Recognize that domain-specific disputes (UDRP/URS) may proceed separately.
3. Permit injunctive relief for misuse or non-transfer.
4. Agree on recognition and enforcement of arbitration awards.
Securities & Regulatory Compliance
Domain Owner Obligations
1. Verify that the equity issuance qualifies under an appropriate exemption and that the company has filed required notices.
2. Receive and acknowledge disclosure documents (subscription agreement, shareholder rights, risk factors).
3. Provide accreditation or residency information as needed.
Company Obligations
1. Ensure full compliance with securities law exemptions.
2. Record equity issuance accurately and deliver confirmations.
3. Provide ongoing investor communications and disclosures if required.
Confidentiality & Publicity
Mutual Obligations
1. Maintain confidentiality of deal terms, valuations, and ownership details except where legally required.
2. Coordinate press releases or announcements; neither party may disclose without the other’s consent.
3. Protect proprietary data exchanged during due diligence.
Post-Closing Transition & Further Assurances
Domain Owner Obligations
1. Support DNS migration, content hand-off, and SSL or email configuration.
2. Execute any additional filings required to perfect the title.
3. Verify that the company has correctly issued and recorded the equity.
Company Obligations
1. Maintain control of the domain post-transfer and confirm functionality.
2. Execute any subsequent filings necessary for share issuance or IP assignment.
3. Provide written acknowledgment of completed transfer.
Risk Allocation & Limitations
Mutual Obligations
1. Define liability caps and survival periods; carve out fraud, gross negligence, and willful misconduct.
2. Specify indemnification as the exclusive remedy except for injunctions.
3. Set conditions for using escrow funds to satisfy claims.
Due Diligence on Domains & Corporate IP
Domain Owner Obligations
1. Supply registrar history, prior transfers, and any monetization records.
2. Disclose any reputational or compliance risks from previous use.
3. Verify company ownership by reviewing corporate registry filings and major-shareholder information to ensure the entity exists and can issue shares.
Company Obligations
1. Conduct trademark and registry checks, WHOIS and DNS history review, and assess any residual liabilities.
2. Verify domain ownership through registrar evidence and escrow confirmation before issuing equity.
Registry & Registrar Rules
Domain Owner Obligations
1. Comply with ICANN and ccTLD rules, remove transfer locks, and ensure fees are current.
Company Obligations
1. Confirm compatibility with corporate registrar policies and ensure successful registration post-closing.
2. Maintain renewals and compliance going forward.
Open-Source & Licensing (if content included)
Domain Owner Obligations
1. Disclose any third-party or open-source components within hosted content.
2. Warrant that no license obligates disclosure of proprietary material.
Company Obligations
1. Review and remediate any conflicting licenses.
2. Ensure compliance with all third-party software or content terms.
Tax Considerations
Domain Owner Obligations
1. Determine capital-gain or income-tax exposure; record fair-market value of equity received.
2. Seek advice on cross-border or withholding issues.
Company Obligations
1. Record domain as an intangible asset at fair value for accounting purposes.
2. Ensure withholding, reporting, and filings are completed.
3. Provide domain owner with appropriate tax forms or certificates.
Final Thoughts
Domain-for-equity contracts mirror traditional equity purchases, built on verified ownership, reciprocal warranties, clear closing conditions, indemnities, and confidentiality. The domain owner becomes an equity holder, while the company secures a strategic brand asset without cash outlay. When structured with sound valuation, escrow, and due diligence, the result is a balanced exchange of digital capital for corporate equity that links brand value with long-term growth.
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