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:
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 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):
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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