A Share Purchase Agreement (SPA) typically involves legal and financial services to ensure a smooth transaction and to protect the interests of both parties involved in the sale of shares. Here are some key services commonly associated with a Share Purchase Agreement:
Legal Drafting and Review: Lawyers or legal firms draft the SPA document to clearly outline the terms and conditions of the share sale. They ensure all legal aspects are covered, including representations and warranties, indemnification clauses, and dispute resolution mechanisms.
Due Diligence: This involves a comprehensive review of the company's financial, legal, and operational status. Financial due diligence ensures that the buyer understands the company’s financial health and potential liabilities. Legal due diligence identifies any legal risks associated with the shares being sold.
Valuation Services: Valuation experts may be engaged to determine the fair value of the shares being sold. This ensures that the purchase price is reasonable and reflects the true value of the company's shares.
Tax Advisory: Tax experts provide advice on the tax implications of the share sale for both the buyer and the seller. They ensure compliance with tax laws and help structure the transaction in a tax-efficient manner.
Negotiation Support: Advisors and consultants may assist in negotiations between the buyer and the seller to ensure that both parties reach a mutually agreeable deal. They help clarify terms, resolve disputes, and facilitate communication.
Closing and Post-Closing Services: Legal professionals oversee the closing process to ensure all necessary documents are signed and funds are transferred correctly. They also handle post-closing matters such as filings with regulatory authorities and the transfer of shares on company books.
Compliance and Regulatory Advice: Advisors provide guidance on regulatory requirements that may affect the transaction, such as approvals from government authorities or industry regulators.
Dispute Resolution: In case of disputes arising from the SPA, legal professionals may assist in mediation, arbitration, or litigation to resolve conflicts between the parties.
Parties Involved: Clear identification of the parties involved in the transaction, including their legal names, addresses, and corporate structures.
Details of Shares: Comprehensive details of the shares being sold/purchased, including the type of shares (e.g., common shares, preferred shares), class, nominal value, and any special rights attached to them (e.g., voting rights, dividend rights).
Purchase Price: Disclosure of the purchase price per share or the total consideration for the shares being transferred, including any adjustments or mechanisms for determining the final price.
Payment Terms: Explanation of the payment terms and conditions, including whether the consideration is paid in cash, through promissory notes, or by other means, and the timing of payments.
Representations and Warranties: A list of representations and warranties made by the seller(s) regarding the shares being sold, such as ownership, title, absence of encumbrances, compliance with laws, financial statements accuracy, and absence of litigation.
Covenants: Agreements and promises made by the parties regarding their conduct before and after the transaction, such as non-compete clauses, confidentiality obligations, and agreements to assist in the transition.
Conditions Precedent: Conditions that must be satisfied before the transaction can proceed to completion, such as regulatory approvals, shareholder approvals, and third-party consents.
The specific documents required for a Share Purchase Agreement (SPA) can vary depending on the jurisdiction, the nature of the transaction, and the preferences of the parties involved. However, here is a general list of documents commonly involved in the process:
Letter of Intent (LOI) or Term Sheet: This document outlines the preliminary understanding between the buyer and the seller regarding the key terms of the transaction. It serves as a basis for drafting the SPA.
Share Purchase Agreement (SPA): The main legal document that details the terms and conditions of the share sale, including the purchase price, representations and warranties, conditions precedent, indemnification provisions, etc.
Disclosure Schedules: These are attachments to the SPA where the seller discloses specific information related to the company being sold, such as contracts, liabilities, litigation, intellectual property, etc.
Due Diligence Documents: Various documents are gathered during the due diligence process, which may include financial statements, tax returns, corporate records (e.g., articles of incorporation, bylaws), employment agreements, customer contracts, leases, intellectual property registrations, etc.
Board Resolutions: Resolutions passed by the board of directors of the selling company approving the transaction and authorizing the execution of the SPA.
Shareholders' Resolutions: Resolutions passed by the shareholders of the selling company, if required under corporate bylaws or applicable law, approving the transaction.
Certificates of Good Standing: These certificates verify that the selling company is duly incorporated and in good standing under the laws of its jurisdiction.
Transfer Documents: Documents related to the transfer of shares, such as stock transfer forms, share certificates (if applicable), and any required filings with governmental authorities or regulators.
Closing Documents: Documents executed at the closing of the transaction, including closing statements, certificates of title, bills of sale (if assets are included), etc.
Legal Opinions: Legal opinions from the seller's and buyer's legal counsel regarding the enforceability of the SPA, authority to enter into the transaction, and other legal matters.
Tax Documents: Documents related to tax matters, such as tax clearances, certificates of compliance with tax obligations, and any tax indemnity agreements.
Escrow Agreements: If funds are placed in escrow pending satisfaction of certain conditions or to secure indemnification obligations, an escrow agreement will be required.
What is a Share Purchase Agreement (SPA)?
A SPA is a legal contract that outlines the terms and conditions of the sale and purchase of shares in a company.
What does a Share Purchase Agreement typically include?
It includes details such as the purchase price, representations and warranties of the seller, conditions precedent to closing, indemnification provisions, and dispute resolution mechanisms.
Why is a Share Purchase Agreement important?
It legally binds both the buyer and seller to the terms of the transaction, ensuring clarity and protection of rights throughout the sale process.
What is due diligence in the context of a Share Purchase Agreement?
Due diligence involves a comprehensive review of the company's financial, legal, and operational aspects to assess potential risks and opportunities associated with the transaction.
Who drafts the Share Purchase Agreement?
The SPA is typically drafted by legal professionals representing either the buyer or the seller, ensuring that all legal aspects of the transaction are addressed.
What are the key differences between a Share Purchase Agreement and an Asset Purchase Agreement?
A SPA involves the transfer of ownership of shares in a company, while an Asset Purchase Agreement involves the transfer of specific assets and liabilities of a company.
How long does it take to complete a Share Purchase Agreement?
The timeline can vary depending on factors such as the complexity of the transaction, due diligence findings, regulatory approvals required, and negotiation of terms. It can range from several weeks to several months.
