When a company decides to sell shares to investors, it’s important to have a clear and concise share purchase agreement in place. This document outlines the terms and conditions of the share sale and purchase, and provides legal protection for both the company and the investor.
Here are some of the key provisions that should be included in a share purchase agreement:
1. Basic terms of the share sale: This should include the number of shares being sold, the purchase price per share, and any payment terms or conditions.
2. Representations and warranties: The company should make certain declarations regarding the shares being sold, such as their ownership, legality, and compliance with relevant laws and regulations.
3. Conditions of closing: This outlines the various conditions that must be met in order for the share sale to be completed, such as obtaining regulatory approvals or executing other necessary documents.
4. Indemnification: This section provides a mechanism for one party to seek compensation from the other party if certain representations or warranties are breached.
5. Restrictive covenants: These are agreements that limit what the shareholders can and cannot do in relation to the company, such as restrictions on selling shares to certain parties or engaging in competitive activities.
6. Governing law and arbitration: This specifies the jurisdiction whose laws will apply to any disputes that may arise, as well as the method of resolving disputes (e.g. arbitration).
7. Confidentiality and non-disclosure: This outlines the obligations of the parties to keep certain information confidential, such as financial or proprietary information related to the company.
Overall, a well-drafted share purchase agreement can help ensure a smooth and successful transaction, while also protecting the interests of both parties involved. As such, it’s important to work with experienced legal counsel to ensure that all necessary provisions are included and that the document accurately reflects the intentions of all parties involved.
