Share Purchase Agreement

An SPA (Share Purchase Agreement) is an official contract regarding the purchase and sale of shares in a corporation. It describes an accord wherein all terms of the particular transaction are spelled out, including the price to be paid, number and type of the sold shares, as well as buyer's and seller's responsibilities. The Agreement includes various representations and warranties on the state of the shares and company, covenants and conditions that should be fulfilled before completing the sale. Also it outlines everything about how closing will take place, potential post-settlement adjustments and other ways to resolve disputes arising out of this agreement. Such a share purchase agreement (SPA) brings clarity on terms and significantly reduces risks for both parties involved in the deal.

Key Components of Share Purchase Agreement 

Here are the key components of a Share Purchase Agreement:

• Purchase Price: Sets out the price that is to be paid for the shares, and any adjustments based on financial conditions or performance metrics.
• Representations and Warranties: State the warranties made by the parties as to the validity, title, share and condition of the company itself.
• Closing Mechanics: Explains how the transaction will be consummated, a detailed description of the transaction completion process, including payment, transfer of shares and delivery of documents.
• Covenants: This shall include all the promises and commitments to be made by the parties, including non-compete clauses and confidentiality agreements.
• Conditions Precedent: Lists the different requirements that must occur prior to the transaction; for instance, approval from regulatory authorities.
• Indemnification: Payments against loss arising from breach of agreement or inaccuracies in representation.

Share Purchas Agreements (SPAs) also vary based on the nature of the transaction and parties to it. Some of the more common types are discussed below.

• Private Share Purchase Agreement: Availed in sales/purchase transactions of private companies, the terms are negotiated directly between buyer and seller, with generally less regulation and scrutiny than for public companies.
• Public Share Purchase Agreement: This would apply to a transaction involving one or more publicly traded companies. It may be constrained by additional regulatory compliance and disclosures because of securities laws and related stock exchange requirements.
• Asset Purchase Agreement: Strictly speaking, this is not a type of share purchase agreement, but it involves the sale of assets rather than shares of a company. This would apply in those instances where buyers would not want to inherit liabilities attributable to shares.
• Stock Purchase Agreement: This is similar to a share purchase agreement but sometimes can be used interchangeably, depending on the context. This Agreement includes the sale of stock (shares) and contains similar terms for purchase price, representations, and warranties.
• Buy-Sell Agreement: Sometimes utilized in closely held companies or partnerships, this agreement dictates the terms under which the sale of shares may be affected amongst current shareholders or to third parties, usually brought about by triggering events, such as death or retirement.
• Shareholders' Agreement: Not a Share Purchase Agreement per se, this agreement may come along with a share purchase and governs the relationship between shareholders and, correspondingly, their rights and obligations with respect to the shares purchased.

The Share Purchase Agreement documents and the general process flow have to be prepared and projected with due care in order to facilitate a hassle-free transaction. A short summary of the typical documents and their process follows:

• Share Purchase Agreement (SPA): The agreement which describes the sale consideration, purchase price, share details, and conditions.
• Due Diligence Reports: Reports dealing with the financial, legal, and operational aspects of the company, including balance sheets, income statements, tax returns, and compliance records.
• Share Certificates: These are documents showing evidence of ownership of the shares being sold.
• Board Resolutions: These are resolutions of the Board or shareholder authorizing the sale of the shares and approving the SPA.
• Stock Transfer Forms: Copies of stock transfer forms or other documents that will be required to effect the official transfer of shares from seller to buyer.
• Legal Opinions: Legal counsel opinions to confirm the legality of the transaction and the legality of the shares to be sold.
• Regulatory Approvals: Documents evidencing compliance with regulatory requirements, such as antitrust approvals or specific consents from the relevant industry.
• Escrow Agreement: If applicable, an agreement showing the terms under which funds are held in escrow until the transaction is complete.
• Disclosure Schedules: Attached to the SPA are disclosure schedules that provide detailed information and disclosures relevant to the representations and warranties made by the seller.

• Negotiation and Drafting: The buyer and seller negotiate the terms of the Share Purchase Agreement, and legal teams draft the agreement to reflect these negotiations.
• Due Diligence: Buyer conducts due diligence with a view to confirm the financial and legal position of the company to ensure that there are no liabilities or problems not disclosed.
• Approval: The boards of directors or the shareholders of both parties approve the transaction by way of resolutions in most cases.
• Execution: The parties execute the Share Purchase Agreement and other related documents such as transfer forms and resolutions.
• Closing: The buyer pays the purchase price and delivers the shares and all documents related to the closing. Conditions precedent must be satisfied, including relevant regulatory clearances.
• Post-Closing: The parties attend to any post-closing matters that may arise, including an adjustment of the purchase price, if required, and confirm that all legal and regulatory filings are made.
• Registration: The transfer of the shares is registered in the registry of the shareholders of the company, accordingly recording the new ownership.

By subsequently undertaking all these steps and preparing the necessary documents, the purchase transaction can take place with ease legally. 

Choosing Corpseed for a Share Purchase Agreement (SPA) means you are adequately guided through the transaction with professional expertise. With their immense knowledge of corporate law and wide experience in both the preparation and management of SPAs, transactions are efficiently and effectively managed to tackle complicated legal requirements. Corpseed provides full-cycle support, right from the negotiation of terms to ensuring compliance with regulatory laws, at minimal risk and with minimal errors. Their customized approach and thorough due diligence contribute to a seamless and legally sound share purchase process.