Share Purchase Agreements Overview

This article focuses on the share purchase agreement. To mitigate risk, it is common for the buyer of a private company to receive some form of insurance from the seller regarding the assets and liabilities of the business. It is generally assumed that the primary purpose of collateral in a normal share purchase agreement is to draw the attention of sellers to the point that might be of concern to the buyer. The warranty verification process is intended to identify potential problems. The parties will then enter into negotiations on the impact these are expected to have on the sale transaction prior to the sale. In this way, the possibility of disputes arising after completion is reduced. The transfer of shares of companies to a new shareholder (also called a member), whether by sale or donation, is very common in UK private companies. However, the deferral clause is very important from the buyer`s point of view. These are the conditions that must be met before the transfer of shares actually takes place. For example, a lender of the company may have imposed a restriction on the sale of shares that would have to be resolved with the lender before such a transaction was made.

In addition, depending on the activity of the Company, permits, permits, permits, etc. may also be required from third parties. This is only a general summary and would in fact depend on the case-by-case and due diligence performed. An SPA generally contains language that states that the terms of the SPA itself, including its existence, are considered confidential information and cannot be disclosed to third parties. However, such wording should include and explicitly refer to all prior non-disclosure agreements (“NDAs”) entered into (and should have been concluded) between Buyer and Seller at an earlier stage of the Transaction, such as.B, the term sheet or the DD phase, and should emphasize that such agreement remains in full force and effect, until this Agreement terminates or is replaced. Each NDA language in the SPA may reflect additions to previous NDAs and incorporate the language of the previous NDA into the SPA by reference, replace those earlier NDAs in their entirety, or claim that only the language of the previous NDA that is incompatible with the SPA will be replaced. Even after the finalization of the sale of the shares, there may still be measures that should be taken on the basis of the agreement between the parties. These range from the settlement of an ongoing lawsuit against the company to the transfer of documents in favor of the buyer. All these measures can only be carried out when the transfer of shares has been successfully completed. The parties must clearly identify these measures and implement them after the transfer. These actions are supported by the indemnification clause.

This clause, a key clause of the agreement, defines the number of shares to be sold to the buyer and the price of those shares. It further describes how the payment would be made, as well as the payment schedule. This is important because there are usually obligations that the parties must fulfill before the shares can be transferred, so that the payment and transfer of the shares usually do not take place on the same day as the conclusion of the share purchase agreement. These obligations may take the form of permits, indices, etc., which must be obtained from the buyer and seller from third parties. The interpretation is dealt with in the share purchase agreement, which contains definitions of all the terms used in the agreement. The sale and purchase of shares are also listed, which covers purchase price adjustments, lists the purchase price and how disputes can be resolved. The warranties and representations of the buyer and the seller give all the statements that the buyer and the seller sign and claim to be true. Everything related to employees is also covered, including the terms of their benefits and how accrued premiums are managed.

In most M&A transactions, the purchase price is typically determined against a target company`s most recent financial statements. Purchase price adjustments typically protect a buyer from changes in the value of the target value between the target valuation date and the closing of the transaction. In this regard, buyers and sellers must agree on a valuation method and have chosen similar or comparable accounting methods. Typical indemnification obligations of a seller include, among other things, the buyer`s exemption from: Warranties and liabilities should be reviewed to ensure that there is no misrepresentation. If this happens and is noticed later, there are possible legal actions and claims of recourse. After the transaction, there may be an adjustment of the purchase price in which the seller must compensate the buyer for false statements. The content of a share purchase agreement depends on the complexity of the transaction. Nevertheless, there are some basic elements that each SPA contains: the purchase of shares represents the purchase of the operational activity of a company .. .