A share purchase agreement can be described as a legal contract between a seller and purchaser where they are termed differently for the sake of purchasing a share.
As the name itself suggests, we think of an agreement where the shares tend to transfer from one party to another. Shares offer ownership to the shareholders which can be achieved through buying a share from a firm or any other existing shareholders of the very firm. In order to make any transfer legally acceptable, it is always advised to opt for a share purchase agreement.
Purchasing shares comprises buying of the business firm’s operating business. In this agreement, no contract with the company alter. When the shareholder wants to sell the shares in any company, then there is a break in the agreement between the shareholder and the target company. The purchaser always insists on keeping the contractual agreements of the company which continues to bind the shareholder even when the purchase is complete.
The primary objective of the share purchase agreement is to ensure that both the lending and the borrowing parties have mutually agreed to the terms and also the number of shares to be transferred at an agreed cost.
It also contains various information pertaining to the business firm along with the rights given to the buyer. Another important aspect of a share purchase agreement is the kind of shares that are transferred from the selling to buying party.
Features of the Share Purchase Agreement
It is very important for the share purchase agreement to be well regulated owing to the discrepancy amongst the shareholders. The agreement is drafted in such a way that it gives respect to the individuality of people involved in it so that due importance is given the opinions on various subjects concerned.
It can never be said that there will not be any disputes or disagreements which may arise when it comes to investing in a company. Therefore, the company should be prepared for all these and the measures taken during such times are conciliation, negotiations, or arbitrations.
Parties involved in the agreement: This typically includes the buyer and the seller, though it is seen sometimes that these parties are shell holding companies only. In such scenarios, it is imperative that the substantive entities involved in the principals are added as guarantors and covenanters for ensuring that the conditions are kept up.
The factual backdrop of the transactions is carefully listed in the recitals so that there is no lack in laying and identifying the terms of relations between the parties.
2. Conditions precedent
This clause is usually quite exhaustive as it has authorizations, permits, and various other permissions that are important along with the person who is responsible in obtaining each of these. This clause also provides information regarding the fulfillment of all the warranties, obligations, representations, execution of covenants and agreements.
This mechanism is important for establishing the time frame along with actions under which the closing will take place. Experts always opine that the closing memorandum is included with the list of board resolutions that await passing.
A share purchase agreement between the selling and purchasing parties forms the foundation of the structure of the contract. The agreement is meant for securing the intention of both parties for extending the investment. Any party can make a considerable return with other parties on the basis of two things: rests made on the agreement along with the holistic performance of the business.
Presently we offer a single package for all share purchase agreements.
Do I need a share purchase agreement?
If an individual or a business firm is involved in buying or selling shares, then they must use a share purchase agreement. For instance, if a corporation has two parties with equal shares where one party wishes to leave the partnership, a share purchase agreement is useful in buying their stocks in the business. After the completion of the buying process, the business agreement can be used.
What information and types are included in the share purchase agreement?
A share purchase agreement consists of information about the corporation regarding the shares that are being transferred for along with the seller and buyer of agreements, type of shares that are being sold, and the agreed price. The agreement also includes details of payment including a deposit that is made, date of completion of payment, and date of closure of agreement.
There are mainly two kinds of classes that define shares. The primary ones are voting and non-voting. In voting shares, the shareholders can voice their opinions on the policy of the company and decisions of the director while the non-voting shareholders cannot exercise such opportunities.
What are the things covered in the share purchase agreement?
The first thing covered in a share purchase agreement is an interpretation which gives an insight into the definitions for all the terms and conditions of the agreement. It also lists the purchase and sale of stock covering the adjustments in purchase prizes and resolving the disputes. It also covers everything related to the employees including the terms of the benefits and handling of the accrued bonus.
Share purchase agreements also cover the details of indemnifications provided by the buyer or the seller. It also includes any costs that may be levied after the transaction is completed. If there is any chance of payment of special tax, that is also included in the share purchase agreement.
If you need any help in preparing your share purchase agreement, then we are here to help you. We are keen to serve and answer your queries, so feel free to connect with us.