What is an Agreement to Purchase Shares?
A legal contract for the sale and purchase of company shares is known as a Share Purchase Agreement.
The seller provides numerous guarantees and representations regarding the company’s various aspects in this agreement.
The buyer pays the purchase price, and after the transaction is completed, the parties sign documents transferring shares.It is essential to verify the stamping procedures and requirements in the relevant jurisdiction.
A Share Purchase Agreement is drafted by whom?
It is written when shares are bought or sold.Typically, it is written by the buyer who wants to buy a company’s shares. It should be clear who has bought the shares and how much they cost.
Who ought to have a Share Purchase Agreement?
A share purchase agreement is necessary for any individual or company involved in the purchase and sale of shares.For instance:If one partner in a partnership firm decides to leave and sell their shares, this agreement allows another partner to buy or acquire their share.
What elements should a Share Purchase Agreement contain?
Both individuals and businesses can buy and sell shares with the assistance of a share purchase agreement.The following should be included:
The buyer and seller’s names are: The disclosure of the buyer’s and seller’s names and addresses at the top of this agreement is critical.Also written with their full addresses is the date that both parties agreed to buy or sell the shares.
The buyer’s and seller’s warranties and representations:It should be made abundantly clear that the seller has sold the shares in their name and transferred their rights.The new owner of the shares would now be responsible for any liabilities.
Dividend: The seller is responsible for any dividends earned prior to selling the shares, while the buyer is responsible for any dividends earned after purchasing the shares.
Law applicable: In a share purchase agreement, the governing or applicable law under which the shares were sold should be made clear.The legal rights of both the buyer and seller of the shares will be safeguarded by this.
Who determines the maximum number of shares a company can issue?
Usually, a company decides how many shares it can issue at once when it first starts up.However, those numbers may need to be adjusted in some instances, and shareholders’ voters will then decide whether to increase or decrease the number of shares.
What are some of a Share Purchase Agreement’s most common clauses?
Common clauses in a Share Purchase Agreement that must be included are:
Parties: Shares can be owned by multiple people, despite the fact that there are typically only two parties.
Conditions prior to now: The purchase of a share may occasionally be subject to conditions.A condition precedent is included in the agreement for these situations.
Agreement to purchase and sell the shares: Because it mentions the title to the shares the buyer is purchasing as well as the goods he will receive, this clause safeguards the buyer’s interest.
Price and importance: There should be a mention of the price to be paid, and the specifics should address additional questions like when the payment will be made and whether the price is fixed or can be adjusted.
Components of completion: The mechanics of completion, delivery, and timing must all be agreed upon by all parties.Share certificates, stock transfer forms, and other post-completion formalities are examples.
Guarantees, repayments, and indicated cures: These are outlined in a separate schedule from the share purchase agreement and discussed in detail.
Tax Provisions: This clause, which is also known as a tax covenant, tax indemnity, or a tax deed, protects the buyer from any undiscovered tax obligations.
Confidentiality: After mutually agreed-upon decisions from both parties, this clause takes effect.
A share purchase agreement aids both parties in the legal purchase and sale of shares. It will specify precisely what is being sold, to whom, and at what price, in addition to any other responsibilities and liabilities.