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A Share Purchase Agreement (SPA) is a legally binding contract that provides the terms and conditions for the purchase and sale of shares in a company. The company using this document can be a public company (PLC) or a private company (LTD). Smaller, closely-held corporations such as a family or small goup of owners are likely to use this document when selling their shares in the company.
The document is created from the standpoint that the buyer can either be a corporate entity (i.e. a company) or an individual who will be purchasing all the issued shares, thereby fully acquiring the target company. Similarly, the seller can either be a corporate entity (i.e. a company) or individuals who are the shareholders in the target company. Where the seller is a company, it can be either a public company (PLC) or a private company (LTD).
This agreement can be used in a merger and acquisitions scenario, or where a company wishes to integrate the target company into its operation by acquisition. In the event that the target company has wholly owned subsidiaries, and all of its shares are acquired by the buyer, the buyer will become the new owner of the subsidiary/subsidiaries.
The shares transferred under the SPA will grant the buyer all the associated rights that come with ownership of the shares. Using an SPA also ensures that the transaction between the buyer and the seller is transparent, legally compliant and mutually agreed-upon.
The seller should make sure that it adheres to any rules pertaining to sale of shares as contained in the artcicles of associations of the company. If there are restrictions on the sale of shares and they are breached, the sale can be invalidated or challenged as being illegitimate. The articles of association may also impose a "freeze-period" within which any sale or transfer of shares will be prohibited and it is important to ensure that such provisions do not affect the proposed sale of the shares to the buyer. Additionally, the shareholders agreement may also impose limitations on the rights of shareholders to sell their shares, and it is therefore important to ascertain that such provisions do not apply or affect the proposed sale to the buyer.
This document should be used where the target company and the buyer are in the jurisidiction of England and Wales.
How to use this document
This document can be used when a company or its shareholders want to sell their shares and requires a written agreement. This document should be kept on file by the parties. Where the sellers are individual shareholders, all the shareholders should keep a copy of the agreement on file as a record of the sale.
This document will ask questions about the details of the parties, the number of shares in the target company, the number and type of shares being sold, the purchase price, the terms of payment, representations and warranties of the parties, completion and post-completion tasks of the seller. Questions about the closing of the sale will also be asked and required to complete the document. Upon completetion of the acquisition of the target company, the buyer will be required to pay the requisite stamp duty and after that, the new shareholder(s) name will be entered into the company's register of members at the companies house.
Upon filling out and printing this document, it should be signed by all involved parties.
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