This Share Sale and Purchase Agreement (Sale by a Company) - With
Subsidiaries, No Real Property is one of a number of share sale agreements
in this subfolder which deal with the sale of a company through the sale of
shares. The first four agreements in the subfolder deal with a sale by a
corporate entity; i.e where the seller is a company. The second four
agreements relate to a sale by specific individual sellers.
If you are not sure which share sale agreement is right for you, please
consult the Share Sale Agreement Comparison Matrix.
This Company Share Purchase Agreement can be used where a Company is
selling one of its subsidiaries and this subsidiary also has subsidiaries
(i.e. it is part of a group). It is suitable for a Management Buy-In. The
sale is by way of a sale of shares. The company being sold does not own
real property (whether freehold or leasehold). At its most basic level, it
is possible to transfer the ownership of shares by the seller executing a
stock transfer form and delivery to the buyer together with the share
certificate (or an indemnity if the certificate has been lost). The buyer
will usually need to have the stock transfer form stamped and pay the stamp
duty on it. The buyer will then lodge the stock transfer form with the
company and will become a member of the company once the board has approved
the transfer and the name of the buyer has been entered in the register of
members. The buyer will be entitled to a share certificate within two
months. Although this process is sufficient to transfer ownership of the
shares to the buyer, because the buyer will be acquiring all the assets and
liabilities of the company when acquiring the shares, the buyer will
usually require a formal share sale agreement. The seller may also wish to
have a formal agreement in order to clarify its liability or ensure clear
Optional phrases / clauses are enclosed in square brackets. These should be
read carefully and selected so as to be compatible with one another. Unused
options should be removed from the document.
This Company Share Purchase Agreement is in open format. The form fields
should be completed and the wording should be adjusted to suit your
In this agreement, the Parties are the Seller and the Buyer, which are both
companies. However, the Buyer may want a parent company guarantee, and so
the parent company will need to be added as a party.
In clause 1 (Interpretation), please choose the appropriate wording for the
definition of the Accounts. If the group of companies being sold has
consolidated accounts, please choose the wording at sub paragraph (b). If
Management Accounts are being provided by the Company (for example, if a
long period of time has passed since the Accounts Date) then the definition
of Management Accounts should be retained.
Clause 3 (Consideration) refers to Schedule 6 where there is an option to
choose between payment for the transaction being made by banker’s draft in
favour of the Seller or the Seller’s Solicitors, or by telegraphic transfer
to a designated account. Since many completions tend to take place at
uncivilised hours (and thus outside normal banking hours!) an undertaking
should be signed. Please see the related documents for two examples of
undertakings that may be used.
Clause 6.2.1 specifies that the maximum liability of the seller under this
agreement for all claims aggregated together is the purchase price.
However, there is an exception for breaches of the warranties in paragraph
1 of schedule 4 (which relates to ownership of the shares and authority to
However, in clause 6.2.2 the seller is given some protection from claims
being brought for trivial breaches and so it is possible to specify a
minimum value of each claim (at clause 184.108.40.206). If the value falls below
this amount, then the claim is ignored (this is the ‘X’ amount in the form
field). A figure should be inserted in the form field such as £1,000 (the
amount will vary depending on the total value of the transaction).
Furthermore, at clause 220.127.116.11, it states that no claims may be brought
unless all the claims of the ‘X’ amount equal or exceed a threshold (the
‘Y’ amount) such as £10,000. So, in our example, if the buyer has 9
individual claims of £1,000, he will not be able to make a claim because
the threshold of £10,000 has not been reached. However, if he has 10 claims
of £1,000 then he will be able to make a claim. Moreover, the buyer will be
able to claim for the whole amount, not just the excess over the £10,000
Clause 7 and clause 8 protect the buyer by placing restrictions on the use
of confidential information and preventing the seller from setting up a
competing business or soliciting the Company’s customers.
Clause 9 is an optional clause where the buyer gives an undertaking to
attempt to obtain the release of the seller from a specified guarantee and
agrees to indemnify the seller against any liability arising after
completion. This will often be useful to the transaction is completed in a
short space of time and the seller has given guarantees to, for example,
its bankers or its landlord.
Clause 10 provides a list of indemnities given by the seller to the buyer.
The wording in square brackets can be used so as to give the Company and/or
each of the subsidiaries the benefit of the indemnities if required. These
cover specific risks and further matters that arise or due diligence may be
included at clause 10.5.
Clause 11 deals with publicity of the sale and purchase. If the parties
wish to make a press announcement, then the wording in square brackets in
clause 11.1 should be retained.
Clause 13 makes it clear that no third party can enforce any of the
provisions of the agreement. Clause 13.1 should be amended if, for example,
the Subsidiaries have been given the benefit of the indemnities under
clause 10. Any other clauses which give rights to third parties which are
intended to be enforceable should be included in this clause.
Clauses 14-23 are “boiler plate” clauses that do not have much impact on
the transaction but which lawyers include for good measure. These should
not be amended unless there are very good reasons for doing so.
Schedule 1 must be completed with details of the Company and the
Schedule 2 includes space for the Tax Warranties and the Tax Covenant.
Having tax warranties is useful for extracting as much information from the
seller so that any issues can be exposed in good time and may be subject to
specific indemnities. Tax is an area of frequent change and its
interpretation can have a significant effect on any transaction. This
schedule has been left deliberately blank for customers’ tax advisors to
include the necessary tax warranties and tax covenants relevant to the
transaction in question. We would strongly recommend seeking independent
tax advice in relation to this.
A detailed set of warranties are included at Schedule 3. These warranties
are also given by each of the subsidiaries of the Company. The amount may
appear daunting at first but they are a fairly standard set of warranties
designed both for the protection of the seller and the buyer. The seller
can easily make disclosures against the warranties and the buyer can learn
as much as possible about the company being bought. Paragraphs 10.4 and
10.5 are optional. 10.4 should be included in the agreement if the accounts
date is not the same as the completion date. 10.5 should be used if
Management Accounts are being produced. Naturally, every transaction
differs from another and discretion should be used by the advisors to the
seller and buyer as to which warranties are most appropriate.
Schedule 4 can be used to insert any provisions regarding pension
Schedule 5 contains arrangements for completion and should be tailored to
the transaction. It should be used in conjunction with the “Completion
Checklist” which can be found in the related documents below.
Share Sale Agreements are complicated documents. If in doubt you should
seek professional advice prior to entering into one.
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