What is Share Purchase Agreement Drafting?
A Share Purchase Agreement (SPA) is a legal contract that outlines how company shares can be bought and sold. Since it serves as the main legal document in a share transfer agreement, it needs to be as detailed as possible regarding share numbers, their total price, and ownership rights.
A Share Purchase Agreement provides clear rules agreed on by all parties involved to minimize disputes during a deal.
When drafting a Share Purchase Agreement, there are some important things to consider. Here’s what to know about key terms you’ll usually find in a Share Purchase Agreement, how to draft it, and how you can benefit from hiring a qualified lawyer to draft it for you.
What Key Terms are in a Share Purchase Agreement?
A Share Purchase Agreement usually contains the following information:
- Parties. The buyer and seller must be identified by providing their full legal names and addresses.
- Purchase price. This is the total cost and payment rules, which must be clarified to prevent disagreements.
- Shares. This section explains the class, number, and types of shares being sold.
- Representations and warranties. Both parties will make certain promises or statements about the deal, such as the seller stating that the business’s financial situation is healthy.
- Closing conditions. To finalize the deal, there must be certain conditions that are met.
- Taxes. Tax liabilities between buyer and seller must be properly listed and allocated to prevent misunderstandings.
- Termination rights. It’s important for parties to know how they can terminate the agreement and exit the deal.
- Dispute resolution. To effectively deal with disputes, the agreement should include a dispute-resolution method, such as meditation or arbitration.
What are Tips for Drafting a Share Purchase Agreement?
A Share Purchase Agreement needs to be precise and comprehensive to protect both parties. Here are some tips for drafting it.
Consider any Complications
When outlining the shares and deal, you want to confirm that no challenges exist, such as restrictions or rights belonging to third parties. By clearing these in the agreement, you’ll prevent transaction obstacles later.
Specify Party Obligations
Both parties’ duties must be outlined in the Share Purchase Agreement so that they are informed of what is required on completion of the shares sale. This could include the recording of certain documents. Should the parties work together after the sale, they will draft new agreements or contracts.
Include Buyer Protections
The Share Purchase Agreement should clearly detail what protections the buyer will receive from the seller, such as restrictive covenants. These prohibit the seller from certain activities, such as working with a competing business, for a specific amount of time.
Specify the Pricing Terms
The total purchase price and payment method must be outlined in the agreement. This section should include price adjustments, which might occur in certain situations, such as if the company has more debt than what was previously thought or if the working capital at closing differs from the previously-agreed capital.
Consider Adding Confidentiality Clauses
It’s common for Share Purchase Agreements to include confidentiality clauses that prevent parties from sharing sensitive or private information about each other or the deal with third parties.
How Does a Lawyer Help with Share Purchase Agreement Drafting?
A Share Purchase Agreement can be challenging to draft if you don’t have experience, which is why hiring a lawyer for help with the task is advisable.
A lawyer will help you in various ways, such as by:
- Defining exactly what is being purchased and sold to create clarity between parties.
- Identifying the shares being transferred, including any rights or restrictions.
- Structuring specific payment terms that prevent confusion and disputes.
- Protecting the buyer by conducting due diligence. This includes adding requirements to the SPA for reviewing company records and other documents.
- Allocating risk fairly between parties. A lawyer will include indemnity clauses that determine who’s responsible if there are any problems after closing.
- Assisting you with closing conditions and transfer requirements so everything is done properly.
- Matching the agreement to the company’s business goals and situation.
- Reviewing a SPA you’ve drafted to check it for accuracy, fairness, and clarity.
Where to Find a Lawyer for Share Purchase Agreement Drafting
While you might want to hire a lawyer to draft your Share Purchase Agreement, there’s always the challenge of where to find a reputable and experienced one. Luckily, online legal platforms make it easy and stress-free to access a network of qualified lawyers who are experienced to help you.
ContractsCounsel is one of the largest online legal marketplaces that enables you to connect to a curated network of lawyers. From the comfort of your home, you’ll find lawyers in your location who are experienced and skilled in contract drafting and review.
If you want to ask a lawyer on the platform to draft your Share Purchase Agreement, these are the easy steps to follow.
- Go to the ContractsCounsel marketplace.
- Post your project for free. Include a few details to help you find the most suitable lawyer.
- Wait for bids. Without having to search for lawyers, you’ll receive multiple bids from lawyers directly on the platform who are interested in your project.
- Review the lawyers’ profiles. You can go through information about the lawyers which is provided by the platform. This includes the lawyers’ location, credentials, years of experience, and client ratings for previous projects completed on the platform.
- Connect with a lawyer you think is best suited to your requirements and hire them to draft a Share Purchase Agreement for a flat fee.
