Share Purchase Agreement

Creating a Share Purchase Agreement (SPA) is a crucial step when buying or selling shares in a company. This document outlines the terms and conditions of the transaction and protects the interests of both the buyer and the seller. Here’s a guide on how to create a Share Purchase Agreement:

Introduction: Begin by identifying the parties involved in the agreement, namely the buyer (often referred to as the “Purchaser”) and the seller (often referred to as the “Vendor”). Provide the legal names and addresses of each party.
Recitals: Include a brief background or preamble section (recitals) that describes the context of the transaction, such as the nature of the business, the number of shares being sold, and the purchase price.
Definitions: Define key terms used throughout the agreement to ensure clarity and consistency. This may include terms such as “Closing Date,” “Consideration,” “Shares,” “Encumbrances,” and other relevant terms specific to the transaction.
Agreement to Sell and Purchase Shares: Clearly state the seller’s agreement to sell, and the buyer’s agreement to purchase, the specified number of shares in the company, along with any accompanying rights, benefits, and obligations associated with those shares.
Purchase Price and Payment Terms: Specify the total purchase price for the shares and the method of payment, such as cash, check, wire transfer, or a combination thereof. Outline any installment payments, escrow arrangements, or adjustments to the purchase price based on closing date working capital adjustments or other contingencies.
Representations and Warranties: Include representations and warranties made by both the seller and the buyer regarding their respective capacities, authority to enter into the agreement, ownership of shares, absence of encumbrances, compliance with laws, financial condition of the company, and other relevant matters. These statements provide assurances about the accuracy of information and protect against potential liabilities.
Covenants: Include any covenants or promises made by the parties to take certain actions or refrain from certain activities before or after the closing of the transaction. This may include obligations related to regulatory approvals, employee matters, confidentiality, non-competition, and cooperation with due diligence and closing activities.
Conditions Precedent: Specify any conditions that must be satisfied before the transaction can be completed, such as obtaining regulatory approvals, third-party consents, or financing arrangements. Outline the procedures for fulfilling these conditions and the consequences of non-compliance.
Closing Procedures: Describe the steps and procedures to be followed on the closing date, including the delivery of documents, payment of the purchase price, transfer of share certificates, and any post-closing matters to be addressed.
Indemnification and Remedies: Address indemnification provisions to allocate risks and liabilities between the parties in case of breaches of representations, warranties, or covenants. Specify the procedures and remedies available for asserting and resolving indemnification claims, such as indemnification caps, survival periods, and dispute resolution mechanisms.
Governing Law and Jurisdiction: Specify the governing law of the agreement and the jurisdiction where disputes will be resolved. Determine the forum for legal proceedings and the applicable laws that will govern the interpretation and enforcement of the agreement.
Miscellaneous Provisions: Include any additional provisions deemed necessary or relevant to the specific circumstances of the transaction, such as assignment, amendment, waiver, notice, and termination provisions.

Once the Share Purchase Agreement is drafted, it’s essential to review the document carefully with all parties involved and seek legal advice to ensure that the agreement accurately reflects the intentions and interests of the parties and complies with applicable laws and regulations. Once finalized, the agreement should be signed by all parties and kept on file for future reference and enforcement.