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If your company is unable to issue shares (p.B if you are a sole proprietor or member of a partnership) or if you plan to sell all the shares of your company, you should consider using a purchase agreement. If you want to formalize the sale of shares in an agreement Although you can modify a SPA model, the advantage of hiring in-house lawyers to draft and negotiate the share purchase agreement is that they can help ensure that it reflects a fair and commercial distribution of the risk of the transaction between the buyer and the seller. Hiring a lawyer can also help protect you from painful discoveries and liabilities after the sale. The agreement offers the subscriber the same protection they would expect if the entire business were purchased directly. We`ve added a menu of 115 guarantees (minus what you want to work on). If the purchase price is to be determined in whole or in part according to the future development of the target company, this is called an earn-out. If an earn-out is to be used, additional drafts are required to document earn-out agreements. Limitation of liability clauses limit the amount that a party must pay to the other party if it suffers damage as a result of a breach of contract between them. It is common for a seller to limit its liability under the contract, especially with respect to warranties, and this is generally accepted by the buyer. For more information, see Limitation of Liability Clauses. A whole series of guarantees protect the investment of the new shareholder, as if he were buying the entire company directly. As subscribed, the document binds all shareholders to the guarantees, but you can decide that only shareholder directors should be at risk.
The stock purchase agreement typically includes a comprehensive completion plan that lists all the documents that the parties must provide and all the steps they must take after the transaction is completed. Many of them are obvious formalities related to the change of ownership of the target company, such as: After completion (singing the agreement), there are certain steps that the buyer must take: if a guarantee turns out to be false, for example, a guarantee that the target company is not currently in a legal dispute, this can lead to a successful claim for damages. The buyer must prove that the breach of warranty resulted in a significant loss, i.e. a decrease in the value of the target business. For more information, see Guarantees in share purchase agreements. Since the general rule of « buyer distrust » applies to the sale of shares, the law does not offer much protection to the buyer if unexpected liabilities or problems arise after the sale of the company. In order to protect the buyer against such unforeseen costs, a SPA includes extended warranties of the seller in which he makes declarations and commitments on the state of the company`s business and assets, and possibly compensation in favor of the buyer, with which he can compensate for any loss of the seller. The guarantee clause and timing in the share purchase agreement often represents not only at least half of the duration of the share purchase agreement, but also more than half of the time spent negotiating the agreement. The shares of the target company could very easily be acquired by the seller by simply giving a duly completed share transfer form to the buyer, but the general law offers the buyer very little protection in terms of the assets and liabilities of the target company. Detailed contractual statements in the form of representations and warranties are therefore the only way for a buyer to obtain information about the actual value of the target and to obtain some form of compensation if any of these statements prove to be false. The document contains a less extensive selection of guarantees than the other share sale contracts we offer. It is intended for smaller and simpler transactions: the subscriber may already know the company (e.B.
he or she may be a director or shareholder), or he or she may trust the shareholders, or the transaction may be low-risk. A subscription contract can be used in the issuance of new shares – to attract a new shareholder or to increase the holdings of an existing shareholder. The purchase price is paid in cash (not in shares of the buyer`s company). The company whose shares are bought and sold could be in any industry. Sellers and buyers can be individuals or other businesses. This settlement is probably the most important operational settlement in the share purchase agreement, but rather one of the shortest and simplest clauses. The main concern of the buyer is to ensure that the correct ownership of the shares is transferred and that the shares are transferred with all the rights associated with them. A share purchase agreement defines the conditions under which the sale and purchase of the target shares will take place and is therefore the most important transaction document in a purchase of private shares. The complexity of a share purchase agreement depends on the nature and circumstances of the transaction, but it is usually a long document, half (or sometimes more) of which can be devoted to a collateral schedule. The consideration is the purchase price to be paid by the buyer for the shares of the target company. When concluding a share sale, it is important that the actual value of the target company is reflected in the agreement. It is common for parties to receive an assessment of the target company through closing accounts and references to annual and management accounts.
This makes it possible to adjust the purchase price if the value of the target company changes. The execution of the SPA and completion (when shares are transferred) often take place simultaneously, but not always. The SPA should describe in detail what happens after completion, for example: ask a lawyer if you need help understanding the guarantees contained in this agreement. In addition to preferred and common shares, a company may refer to its shares with a specific class structure. There are generally three classes (class A, B and C) that describe proportions with different characteristics. For example, a Class A share may have more voting rights per share than a Class B or C share. Our lawyers barry doherty, Neil Williamson or James Ferrow, lawyers specializing in share purchase agreements, will help you answer all your questions. .