What is a Purchase Agreement for Shares?
A Share Purchase Agreement is a legally binding agreement for the sale and purchase of company shares.
In this agreement, the seller makes numerous representations and guarantees regarding the company’s various aspects.
After the purchase price is paid by the buyer, documents transferring shares are signed by both parties.It is absolutely necessary to confirm the stamping requirements and procedures in the relevant jurisdiction.
Who writes a Share Purchase Agreement?
When shares are bought or sold, it is written.It is typically written by the person who wants to buy shares of a company.Who bought the shares and how much they cost should be obvious.
Who should be in possession of a Share Purchase Agreement?
Any individual or business purchasing or selling shares must sign a share purchase agreement.For example:This agreement allows another partner to buy or acquire a partner’s share if one partner in a partnership firm decides to leave and sell their shares.
The following are typical terms that must be included in a Share Purchase Agreement India are as follows:
Conditions Precedent and Closing Conditions
All actions required of both parties prior to the actual sale of shares are referred to as conditions precedent.These conditions, in the seller’s view, are the result of the buyer’s due diligence.The buyer generally does not have any prior conditions that it must fulfill; however, this varies from case to case and depends on the parties’ mutual agreement.
However, the conditions precedent clause is very important to buyers.Before the transfer of shares actually takes place, these are the conditions that must be met. A restriction on the sale of shares, for instance, may have been imposed by the company’s lender; this issue needs to be resolved with the lender before the transaction can proceed.Additionally, depending on the company’s business, authorizations, permissions, etc.could also come from third parties.This is only a generalization; the actual results would vary from case to case and based on the investigation that was carried out.
When these conditions were met, one party would notify the other, at which point the parties would proceed with the sale.The other party may seek termination of the Share Purchase Agreement due to time lapse if these actions are not completed within the specified time frame or to the other party’s satisfaction.
A party’s liability for losses incurred as a result of a breach of an agreement’s representation and warranty, covenant, or obligation is specified in an indemnification clause.It could provide a remedy for claims that is exclusive or not.It also explains how and when either party can bring claims, as well as the time frame, limitations, and exclusions on claims.
Typically, agreements include general indemnity clauses; however, specific indemnities can also be sought from the sellers based on the findings of due diligence.
Based on the agreement between the parties, there may still be actions that need to be carried out after the sale of shares is complete.These can include transferring documents in favor of the buyer or ending any litigation that is currently pending against the company.Once the transfer of shares is successful, none of these actions can be carried out.After the transfer, the parties must clearly identify these actions and carry them out.The indemnity provision safeguards these actions.