Underwriting Agreements Guide for Investors
3245 reads · Last updated: November 26, 2025
Underwriting agreements are contracts between an issuing company and underwriters (usually investment banks or securities firms) that outline the terms and conditions under which the underwriters will help the company issue securities (such as stocks or bonds). In these agreements, the underwriters agree to purchase all or part of the securities to be issued by the company and then resell them to investors. Key elements of an underwriting agreement typically include the underwriters' responsibilities, the price at which the securities will be issued, the underwriters' commission, marketing strategies, and other relevant terms. Underwriting agreements can be categorized into two types: firm commitment and best efforts. In a firm commitment underwriting, the underwriters agree to purchase all unsold securities, assuming the risk of any unsold portions. In a best efforts underwriting, the underwriters agree to sell as much of the securities as possible but do not guarantee the sale of all the securities.
