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A Share Sale and Purchase Agreement is an agreement for the sale and purchase of a stated number of shares at an agreed price. The shareholder selling their shares is the seller and the party buying the shares is the buyer. This agreement details the terms and conditions of the sale and purchase of the shares.
Note that the seller must be the owner (i.e the shareholder) of the shares it intends to sell in which case, it may decide to sell all or part of its shares. If the shareholder sells its entire shares in a company, it completely divests its interest in the shares in the company and automatically ceases to be a shareholder of the company. Also, before a party can transfer/sell shares, such party must hold shares in that company and can not transfer more than it has.
What distinguishes this document from a Share Subscription Agreement is that a share subscription agreement is used in cases where a company is selling their own shares, while in share sale and purchase agreement, a shareholder of the company is selling an already issued shares to another party.
Shares are fixed identifiable units of capital that represents a member's stake in a company. Once a person holds shares in a company such party becomes a member of the company with the right to transfer and transmit the shares. The various classes of shares that can be offered by a company are: ordinary shares, preference shares, deferred ordinary shares, cumulative preference shares, redeemable preference shares, etc.
The document outlines the parties to the transaction, description of the shares being offered for sale, purchase price (consideration), warranties and representations of the parties, pre-completion and post-completion requirements, etc.
How to use this document
This document is used when a party (seller) decides to sell all or part of its shares to another (the buyer).
After completing this document, the parties to the agreement should sign the document. If the seller is a company, the common seal of the company must be affixed on the document and at least two directors or one director and one secretary must sign the document on behalf of the seller. Where the seller is an organization other than a company, an authorized representative of the organization must sign the document. Note that an authorized representative is a person in position of office. For example, a general manager, managing partner, partner etc. of the organization.
After this is done, the buyer must also sign the document. If the buyer is a company, the common seal of the company must be affixed on the document and at least two directors or one director and one secretary must sign the document on behalf of the buyer. If the buyer is an organization other than a company, an authorized representative of the organization must sign the document.
Once all the parties to the agreement have duly sign the document, the parties are expected to keep at least one original signed copy of the document for record purposes.
After this is done, the company must file the following document to the Corporate Affairs Commission to reflect the acquisition of shares by the buyer(s):
After the post incorporation filing is done, the company must take steps to ensure that the name of the buyer(s) is entered in the register of members of the company (if the buyer is not already a member of the company).
The Companies and Allied Matters Act is the applicable law. Also, the Investment and Securities Act and the Securities and Exchange Commission (SEC) Rules are applicable. The general rules of contract are also applicable.
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