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How Does a Share Purchase Agreement Work?

A share purchase agreement protects the parties involved as it offers freedom to guard
their concerns well ahead of the transfer of shares.


We have a team of highly experienced lawyers you can connect with.

Step 1


We will share the first draft in 5-6 business days.

Step 2


We will allow you to make two iterations at no extra cost!

Step 3

What Is a Share Purchase Agreement? - an Overview

People hold a stake or ownership in a company through shares. Several times, people buy and sell shares in companies. The person buying shares is the buyer. This transaction of buying and selling shares is done through a legally binding agreement. A share purchase agreement is an agreement between two parties in which the seller agrees to sell the stated number of shares to the buyer at a particular price.

The agreement is made to prove that both parties agreed to the transaction and includes various other details of the transaction. A share purchase agreement can be drafted by legal experts who are aware of the process and the procedure of such a transaction. Vakilsearch is one such organisation that will handle this for you.

Benefits of Share Purchase Agreement

  • It helps the parties to clarify their intent and guard their interests well before the transaction and sales of shares is done
  • It acts as a record of transactions
  • It helps in formalising and executing the sale of shares in an organised and legal manner
  • Since share purchase agreements are detailed and cover all areas involved in the transaction, there is little to no scope for confusion
  • It helps in building a legal structure to protect the benefits of sellers, in case they are duped or cheated
  • It helps authorities in keeping a track of such transactions and therefore enforcing them
  • It helps companies keep track of shareholders and include them in their decision-making process.

Checklist of a Share Purchase Agreement

  • Though it is not legally required, recitals are to be included because it sets down the primary context of the agreement
  • The agreement must mention the accurate and complete details of the parties
  • It must include the number of shares involved in the transaction and any other details of the shares
  • The purchase price of the shares is considered to be fair to both parties
  • Mutual agreement on the mode of payment of the purchase price
  • The closing mechanism for city, date, time and the duration within which the procedures are concluded
  • The warranties and representation of the buyer and seller
  • Warranties are contractual statements by the seller made upon the conclusion serving the objective of delivering out the information which the buyer must be aware of in regard to the shares and business involved
  • Any false or inaccurate information provided may land all parties in the court, thus proper attention must be taken
  • Statement of severability and binding effect of the agreement.

Procedure of Drafting a Share Purchase Agreement

  • Step 1: One has to approach a legal expert or a lawyer who will consider and hear all the necessary details of the transaction
  • Step 2: The lawyer will then draft the share purchase agreement accordingly
  • Step 3: The draft agreement will be sent to you for review by the lawyer within 5-6 business days.

Documents Required

  • Share transfer form- After completion, the seller of the shares must hand it over to the buyer, a signed share transfer form setting out the shares being transferred and the consideration received.
  • Share certificate- The company requires to cancel the seller’s existing share certificate and gives new share certificates according to the new shareholdings.
  • Letter of resignation- If the seller resigns from the company, the seller must hand over the resignation letter prior to or on completion.
  • Notification to ASIC- Once a share sale has been effected, the company requires to notify the ASIC (application-specific integrated circuit) within 28 days of the change. This can be done by Form 484, which is available on the ASIC website.

Why Vakilsearch?

A share purchase agreement is a very necessary document as it binds the transaction of shares. It is thus very important that the agreement is specific and includes all the key details. It prevents confusion and covers all areas of the transaction.

  • A share purchase agreement needs to be drafted by experts who can ensure that you benefit from the transaction and are not duped or cheated
  • It is important for the agreement to be factually and legally correct. Vakilsearch is one organisation that has various experienced legal experts who will oversee that your share transaction is done smoothly
  • Our service is client-centred, ethical and reliable.
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