Best Efforts Underwriting Law and Legal Definition

Best efforts underwriting is an agreement in which an underwriter makes to act as an agent between an issuing company and investors. The agreement may be that the offering is final only if a specified minimum number of shares are sold, or the offering can be an all or none offering where the issuer has the right to cancel the entire issue if all of the shares in the issue are not sold.

Best efforts underwriting is mainly used in selling an issue for a new or speculative company. In a best efforts underwriting, the underwriter does not purchase the new issue but merely agrees to act as an agent and use the underwriter's best effort to sell as many shares as possible.

Best effort agreements are used mainly for securities with higher risk, such as unseasoned offerings.