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Share Purchase Agreement

An agreement between two parties in which the seller agrees to sell the stated number of shares to the buyer at a particular price.

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How does share purchase agreement work for you?

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

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What is the share purchase agreement format?

The share purchase agreement process

  • Format the document for the share purchase agreement process.
  • At the top of the page insert a proper title for the share purchase agreement.
  • Identify the parties to the sale. There must be a brief description of the identification of the purchaser and the seller at the start of the agreement.
  • There must be an accurate legal description of the property in the agreement.

The purchase price and payment

  • State the purchase price.
  • Identify if any earnest money is deposited.
  • Describe the financing.
  • List the items that are included in the sale.
  • Identify the items that are not listed in the sale.
  • State whether the sale was practised by the buyer, on selling their home.

Describing closing cost

  • State the closing costs, the seller must pay.
  • State closing cost the buyer must pay.
  • State who will pay the taxes.

Describing the inspection process

  • Inspect the buyer to secure an inspection.
  • State whether the sale is contingent on an inquiry.
  • Identify options if the inspection is unsatisfactory.
  • Recommend that the purchaser secures a survey.

Making promises about the property

  • List the seller’s representation.
  • Describe the deed conveyed.
  • Describe how the “risk of loss” passes.

Finalizing the agreement

  • Include a dispute resolution cost.
  • Confirm the time of acceptance and closing.
  • Add the acceptance by the seller.
  • Show your draft agreement to an attorney.
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Benefits of the share purchase agreement

Business Alertness

As a vital business habit, share purchase agreement (SPA) is undertaken during the onboarding process of a shareholder. Although recent companies intend to work unintentionally, the lack of such an agreement can lead to multiple unnecessary outcomes that can be quickly avoided.

Secures People Involved

A share purchase contract ensures the people concerned are given the opportunity to guard their interests well ahead of the transfer of shares. As an all-inclusive agreement, it preserves all aspects of business dealings and is essential for parties connected to analyze every provision involved in the agreement and thereby understand its meaning.

Here are some advantages of the share purchase agreement:

  • It helps in formalizing and executing the sale of shares in an organized and legal manner.
  • Since SPAs 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 requirements 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.

Who needs a share purchase agreement?

If an individual is purchasing or selling shares in the company or industry with another business or person, they should use a share purchase agreement. For instance, if there are two partners for a business, they have equal rights and shares. If one person is leaving the partnership, a share purchase agreement can be used to buy his/her stocks in the business. When all of the shares are acquired, the purchase of a business agreement can be utilized instead.

Share purchase agreement draft

The share purchase agreement is the main document. It is normally drafted by the buyer although it is common for the seller to produce the first draft on an auction sale. On an auction sale, the first draft is usually prepared by the seller.

What is the information to be included in the share purchase agreement?

  • The purchaser of the shares.
  • The seller of the shares.
  • The company form which shares being sold.
  • The value of shares.
  • The law that governs the agreement.
  • The type of shares that are sold.

Procedure for a share purchase agreement

  • You can have contact from a well efficient lawyer and explain the total process and make them understand the need to share purchase agreement with you.
  • Once the objection of the same is clear, the lawyer shall draft the purchase agreement accordingly.
  • The draft share purchase agreement will be sent to you for your review.
  • Finally, the whole process takes around 3-4 working days.

What information does a share purchase agreement have?

A share purchase agreement has information about

  • The company that the shares are being transferred for.
  • The seller and the buyer of the shares for the SPA.
  • What law covers the agreement.
  • The type of shares being sold.
  • How many shares are being sold and at what price?
  • The agreement also has payment details including if the deposit is necessary.
  • When the complete payment is due and the closing date of the agreement.

There are two types of classes and shares that define shares. The important thing is voting and non-voting. Voting shares let the shareholder voice an idea on the board of director’s choices and on corporate strategy. Non-voting shareholders are not capable of voting on board of directors changes or on corporate policies.

Documents required for a share purchase agreement

  • Share transfer form- After completion, the seller of the shares must handover to the buyer ie 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.

FAQs on Share Purchase Agreement

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Recent Updates

ITC will Purchase SFPL Equity Shares, as per the Terms of a Share Purchase Agreement

25 May 2020: The Indian Tobacco Company (ITC) Limited has agreed to purchase all equity shares of the market leader of spices in Eastern India, Sunrise Foods Private Ltd (SFPL), via the terms and conditions of a Share Purchase Agreement (SPA).

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