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Share Sale and Purchase Agreement Fill out the template

Share Sale and Purchase Agreement

Last revision
Last revision 18/02/2019
Formats
Formats Word and PDF
Size
Size 9 to 14 pages
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Last revision: 18/02/2019

Size: 9 to 14 pages

Available formats: Word and PDF

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Share Sale and Purchase Agreement

A Share Sale and Purchase Agreement is an agreement between a buyer and purchaser in which the seller agrees to sell a stated number of shares at an agreed price. This agreement details the terms and conditions of the sale and purchase of the shares.

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.

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.

However, a Share Subscription Agreement is used if the company itself issues/sells its shares to new or existing shareholders. The Share Subscription Agreement is also available for sale.

There are different types of shares, however, the two most common shares that can be sold under this agreement are as follows:

  • Ordinary shares: This type of shares rank lower in priority than preference shares as ordinary share holders do not receive a fixed sum of money (to be paid as dividends) by the company and in the event that the company winds up, preference share holders are paid first before ordinary shareholders.
  • Preference shares: This type of shares entitles the holder to a fixed dividend and whose payment takes priority over the ordinary shares dividends.

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.

  • The parties: The parties to this agreement are the seller, the buyer and the company whose shares are being sold. Note that the seller or buyer can either be an individual, company or any other organization. This is because a company and organizations, like business names and incorporated trustees, can own shares in a company.
  • The shares: In this document, the form filler will be required to set out the type and the amount of shares to be sold to the transferee(s)/investor(s).
  • The consideration: This is the purchase price of all the shares sold under the agreement. In this agreement, the form filler will be required to include the purchase price, how and when the purchase price will be paid. This includes:
    • whether the buyer(s) will be required to pay deposit;
    • whether the payment will be made in installments or by a single lump sum;
    • the mode of payment;
    • when the payment will be made, etc.
  • Completion: This occurs when the buyer(s) is granted title and ownership of the shares. This includes the date of completion and the place of completion. It also includes the obligations of the parties after completion (such as, the transfer of title documents to the buyer(s)).
  • Covenants and representations of the parties: This is the legal promise to do or refrain from doing certain acts. The document also contain the covenants of the seller and buyer(s).
  • Termination: This occurs when any of the parties decide not to continue with the agreement. This may occur in a number of situations such as where all the parties mutually agree to terminate the contract, where the warranties/representations of the seller/company are untrue, where the buyer(s) fails to pay the purchase price (but in this case will be liable to pay damages and other reliefs available to the seller as penalty for the default), 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 filling the form, the parties to the agreement must 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):

  • Form CAC2A (Return of Allotment);
  • board resolution of the company (whose shares are being transferred) approving the transfer of shares;
  • if the seller is a company, board resolution of the company approving the transfer of shares;
  • if the buyer is a company, board resolution accepting the transfer of shares; and
  • a share transfer form.

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).

Applicable law

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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