{"id":30853,"date":"2021-05-23T10:00:53","date_gmt":"2021-05-23T04:30:53","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=30853"},"modified":"2021-05-22T17:57:09","modified_gmt":"2021-05-22T12:27:09","slug":"share-purchase-agreement-important-things-to-keep-in-mind","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/share-purchase-agreement-important-things-to-keep-in-mind\/","title":{"rendered":"Share Purchase Agreement: Important Things to Keep in Mind"},"content":{"rendered":"\n<p class=\"has-drop-cap\">When it comes to acquiring &amp; selling businesses, one of the most convenient ways to transfer ownership is to sell out the company&#8217;s share. This is because while the business ownership may change, the daily activities of the business continue, with workforce, contracts &amp; property staying with the company. When somebody sells their business shares, they often expect to accomplish a clean break. However, this is impractical in the real world as most of the firm tends to cover up their tax liabilities while transferring the ownership to another party. The non-disclosure of tax liabilities during the transaction could disrupt the buyer&#8217;s growth in the future. Fortunately, with the help of a <a href=\"https:\/\/corpbiz.io\/share-purchase-agreement\"><strong>share purchase agreement<\/strong><\/a>, you can keep such a threat at bay.<\/p>\n\n\n\n<p>While it is viable to alter to\ntemplate SPA, involving corporate lawyers to draft &amp; negotiate the share\npurchase agreement keeps the possible anomalies at the bay that may disrupt the\nbuyer-seller relationship in the future. With the lawyer&#8217;s help, you can also\nprotect yourself against stressful post-sale discoveries &amp; liabilities.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/share-purchase-agreement-important-things-to-keep-in-mind\/#What_is_a_Share_Purchase_Agreement\" >What is a Share Purchase\nAgreement?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/share-purchase-agreement-important-things-to-keep-in-mind\/#Essential_Clauses_in_Share_Purchase_Agreement_that_seeks_Professional_Attention\" >Essential Clauses in\nShare Purchase Agreement that seeks Professional Attention<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/share-purchase-agreement-important-things-to-keep-in-mind\/#Other_Important_Areas_to_Look_Upon_While_Drafting_Share_Purchase_Agreement\" >Other Important Areas to\nLook Upon While Drafting Share Purchase Agreement<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/share-purchase-agreement-important-things-to-keep-in-mind\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_a_Share_Purchase_Agreement\"><\/span>What is a Share Purchase\nAgreement?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A share purchase agreement\n(SPA) is the contract that is primarily used in the private sale of\nshares.&nbsp;<\/p>\n\n\n\n<p><strong><em>The SPA will:<\/em><\/strong><\/p>\n\n\n\n<ul><li>Enclose the briefing on the main commercial terms related to\nthe transaction, such as sale price, buyer and seller info, and what shares are\nbeing sold), &amp; the obligations of the parties regarding the sale.<\/li><li>Enclose the key business details and ensure buyer&#8217;s\nprotection.<\/li><li>Enclose confidentiality terms &amp; protections for the\nbuyer against competition from the seller in the post-sale phase.<\/li><li>Outlines any terms related to the sale such as the buyer\navailing licensing permissions to undertake business activities.<\/li><li>During the share transaction process, a SPA is drafted by\nthe buyer&#8217;s legal associates. It is the buyer who mostly cares about\nrepercussion of SPA on his\/her business journey.<\/li><\/ul>\n\n\n\n<p>Where a firm is being sold out at auction, the seller&#8217;s advocate will generally draft a share purchase agreement &amp; make this accessible for the investigation to interested bidders. Following the negotiation of the provisions &amp; the inspection process, the parties each render their approval by signing the SPA. The buyer pays the cost, and the shares are officially transferred to the buyer via a stock transfer form. Typically this happens on the same day.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/drafting-of-share-purchase-agreement\/\">Drafting of Share Purchase Agreement: Underlining the Important Clauses <\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Essential_Clauses_in_Share_Purchase_Agreement_that_seeks_Professional_Attention\"><\/span>Essential Clauses in\nShare Purchase Agreement that seeks Professional Attention<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A share purchase agreement is usually descriptive and contains a primary document &amp; multiple schedules or annexes enclosing terms and detail of the transaction. While a Share Purchase Agreement can be in various formats, the following are the most vital clauses and should be prepared by well-versed professionals.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/05\/Essential-Clauses-in-Share-Purchase-Agreement-that-seeks-Professional-Attention.png\" alt=\"Essential Clauses in Share Purchase Agreement that seeks Professional Attention\" class=\"wp-image-30978\" width=\"539\" height=\"339\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/05\/Essential-Clauses-in-Share-Purchase-Agreement-that-seeks-Professional-Attention.png 997w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/05\/Essential-Clauses-in-Share-Purchase-Agreement-that-seeks-Professional-Attention-300x189.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/05\/Essential-Clauses-in-Share-Purchase-Agreement-that-seeks-Professional-Attention-768x485.png 768w\" sizes=\"(max-width: 539px) 100vw, 539px\" \/><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Parties<\/h3>\n\n\n\n<p>At the inception of the SPA,\nthe seller and buyer identity are described. Where multiple shareholders own\nthe firm, it is vital for the buyer to ensure that each seller is accountable\nfor the entire liabilities, or if this isn&#8217;t the scenario, how the liability&#8217;s\ndistribution between respective sellers will be allocated.<\/p>\n\n\n\n<p>At times, there might be other\nparties (bank or Group Company) to the document that claims to cover the\nseller&#8217;s obligations. The firm being sold can also be turned into a party, for\ninstance, where property of a business is being transferred in or out of the\nselling firm as part of the deal.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Definitions &amp;\ninterpretation<\/h3>\n\n\n\n<p>Defined terms simplify the\ndocument &amp; certain words, for instance, what is meant by IPR or&#8217;\nconfidential information&#8217;. Clarifying terms up-front helps avert potential\ndisputes about what these mean. The &#8216;interpretations&#8217; play a pivotal role in\ndefining how certain phrases ought to be interpreted in law.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Sale &amp; purchase of\nshares<\/h3>\n\n\n\n<p>At the core of the SPA is the\nagreement that the buyer will purchase, and the seller will sell, the share of\nthe target company. Typically, the seller agrees to transfer the shares\n&#8220;with full title guarantee&#8217; that implies that the seller owns the shares\noutright, they held the right to dispose of them, that they would leverage\nevery method to carry out the transfer to the buyer, &amp; that the shares are\nnot exposed to any limitations or third-party rights.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Price<\/h3>\n\n\n\n<p>A SPA should reflect the share&#8217;s\nselling price, what currency will be used for a transaction, time period, and\nother conditions such as partial payment related to firm performance. General,\nthe transaction is completed in cash, albeit at times the buyer may offer some\nof its own shares to the seller or issue loan notes to the seller. Such matters\nare handled by the professional, in general.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Sale conditions<\/h3>\n\n\n\n<p>Typically, the share\ntransaction process is completed in a single day after the preparation of the\nSPA.&nbsp;<\/p>\n\n\n\n<p>At times, there may be a lag\nbetween contract exchange &amp; deal completion, especially when there are\nterms to be fulfilled before the sale can occur.<\/p>\n\n\n\n<p>In such scenarios, it is vital\nto supervise the whole process via a legal professional as they can help in\ndescribing the conditions and managing the delay in the transaction between\nsignature &amp; completion.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Other_Important_Areas_to_Look_Upon_While_Drafting_Share_Purchase_Agreement\"><\/span>Other Important Areas to\nLook Upon While Drafting Share Purchase Agreement<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>Where the buyer or seller is a publically-held company, outlining terms may require that they get shareholder&#8217;s approval to the transaction.<\/li><li>If the business is operating globally, you might need to avail clearance from the respective <em><strong>government<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Government\"><em><strong>[1]<\/strong><\/em><\/a><\/sup> avenues.<\/li><li>The buyer may need licensing or regulatory approval to the purchase, for instance, if the business carries out its operation in a sector such as banking or insurance.<\/li><li>Selling shares is typically simpler than selling a business asset; for major business contracts to remain intact after the sale like leases, the landlord&#8217;s approval &amp; other third-parties may be required.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Hiring an advocate to draft a share purchase agreement is rather a proactive move as it helps keep the legal complications at bay and impart transparency in the contract. Since there is much legality involved in SPA, it is advisable to consider the aforementioned factors carefully. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/share-purchase-agreement-in-nbfc\/\">What is Share Purchase Agreement in NBFC?<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>When it comes to acquiring &amp; selling businesses, one of the most convenient ways to transfer ownership is to sell out the company&#8217;s share. This is because while the business ownership may change, the daily activities of the business continue, with workforce, contracts &amp; property staying with the company. When somebody sells their business shares, [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":30981,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[438],"tags":[1761],"acf":{"service_id":"275"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":5217,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/30853"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=30853"}],"version-history":[{"count":18,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/30853\/revisions"}],"predecessor-version":[{"id":30980,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/30853\/revisions\/30980"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/30981"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=30853"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=30853"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=30853"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}