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Share Purchase Agreement
A share purchase agreement is a formal contract or an agreement which sets out the terms and conditions relating to the sale and purchase of shares in a company.
Timeline - 10 to 15 Working days
Share Purchase Agreement
What is meant by Share Purchase Agreement
The share purchase agreement should very clearly set out what is being sold, to whom and for how much, as well as any other obligations and liabilities.
If a company or individual is purchasing or selling shares in the company with another business or person, they require a share purchase agreement. Share purchase agreements are commonly used by Partnership firms when the shares are transferred between partners, and in startups which raise capital by issuing shares to investors.
Share Purchase Agreement
Common Clauses in a Share Purchase Agreement
01.
Parties
Normally there will be two parties however if the shares are owned by several persons then it will usually be a required to have each shareholder a party to the agreement.Although occasionally, where there are multiple parties, solicitors will include their details in a separate schedule to the agreement.
02.
Conditions Precedent
In certain situations, it may be necessary for completion of the share purchase agreement to be conditional on certain matters, such as obtaining tax clearances or regulatory approval hence in such a case a conditions precedent would normally be inserted into the agreement.
03.
Agreement to sell and to purchase the shares
This clause is normally very short however it protects the purchaser’s interests, namely that he is to receive good and proper title to the shares that he is buying.
04.
Price and consideration
The purchase price provisions should also address several auxiliary issues, including: (i) how the price will be satisfied (ii) when the price must be paid and (iii) whether the price is a fixed sum, or subject to a price adjustment mechanism.
05.
Completion mechanics
The completion mechanics can be difficult as the parties will need to agree upon timings, place of completion, the actions and what is to be delivered at completion. The latter normally includes all of the post-completion formalities (i.e. stock transfer forms, share certificates, board approvals and the company’s statutory books).
06.
Warranties, indemnities and specified remedies
This element is discussed in further detail in the following section however the seller’s warranties are normally set out in a separate schedule to the share purchase agreement.
07.
Tax Provisions
This is frequently referred to as a tax covenant, tax indemnity or a tax deed however its purpose is always the same, it offers the purchaser protection for any tax liabilities that may not have been revealed by the due diligence.
08.
Confidentiality
In most transactions, confidential information will be disclosed by both parties therefore it is common practice that the share purchase agreement will include a confidentiality provisions addressing these matters.
Share Purchase Agreement
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What are the Documents required for a share purchase agreement?
Share transfer form
Share certificate
Letter of resignation
Notification to ASIC
Share Purchase Agreement
FAQ
A transfer of shares, also known as a stock transfer, is the process of changing ownership of shares from one shareholder to another in a private limited company.
A stamp duty tax is owed if the transfer of shares involves a transfer of money or value.
If the value is less than £1,000, you will need to complete an exemption certificate, but you don’t have to notify HMRC about the transaction.
If the value is more than £1,000, you will have to send off your Stock Transfer Form to HMRC within 30 days of the effective date of transfer for the form to be stamped.
Name of the company. Purchaser’s name.
Par value of shares. (face value of a bond)
The number of shares being sold.
When/where the transaction takes place.
Representations and warranties offered by the purchaser and seller.
Potential employee problems, such as rewards and bonuses.
Par value of shares. (face value of a bond)
The number of shares being sold.
When/where the transaction takes place.
Representations and warranties offered by the purchaser and seller.
Potential employee problems, such as rewards and bonuses.
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