Lock-Up Agreement (Securities & Capital Markets Glossary)

Summary

An agreement prohibiting a company or its officers from selling shares during a period of time, typically 180 days after an IPO. An underwriting agreement will typically include a lock-up provision for a company, and its directors, executive officers and possibly significant shareholders will sign separate lock-up agreements. The purpose of these lock-up agreements is to help provide for an orderly market in the company’s shares after closing by preventing these shareholders from dumping their shares into the market immediately after the IPO.