Share Sale and Purchase Agreement
This month a new short form version of the share sale and purchase agreement (SPA) has been added to the site. This is to reflect situations where only one shareholder (of at least two shareholders) in a company is selling their shares to a third party. Most of the SPA templates reflect the entire issued share capital in a company (100%) being sold.
Several assumptions have been made when drafting this new template, including that there are two existing shareholders (A and B), each holding 50% of the current issued share capital. Shareholder A will be selling all their shares, but shareholder B will be retaining their shares. Limited warranties are given by both A and B on the assumption that the buyer has a reasonable degree of familiarity with the company. Shareholder B is a party to the agreement only in order to provide a level of comfort to the buyer, particularly in relation to the warranties being given. There are no tax provisions or tax warranties included.
This template can be adjusted to include multiple selling shareholders and different percentage holdings as required.
Note that there is no issue of new share capital rather this is a sale of existing shares. For a company proposing to issue new shares to for example an investor, our Share Investment Agreement (Cash) may be more appropriate.
This new template will be of interest to all directors and shareholders of small private companies.
The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.