Share purchase agreement template
Secure future share transactions with this free share purchase agreement template that outlines terms for buying and selling company shares.
Secure future share transactions with this free share purchase agreement template that outlines terms for buying and selling company shares.
A share purchase agreement (SPA) is a vital document in the realm of business transactions, especially when it involves the sale or purchase of shares in a company. Understanding its purpose, use cases and management is crucial for businesses – particularly for legal, HR and commercial teams in growing companies.
This article will delve into what a share purchase agreement is, its purpose and use cases. We also look at what a share purchase agreement template should include, how templates are managed and how to overcome challenges by automating them with Juro’s contract management software.
A share purchase agreement is a legal contract that outlines the terms and conditions under which shares in a company are bought and sold. This agreement is between the seller – who is the current shareholder – and the buyer, who is interested in acquiring the shares. The SPA details the price, the number of shares and the specific obligations of both parties.
The purpose of a share purchase agreement (SPA) is to provide a clear, legally binding framework for the transfer of ownership of shares from the seller to the buyer. It serves several critical functions:
Share purchase agreements are typically managed by the legal team within a company. However, other teams – like HR and commercial – may also be involved depending on the context of the transaction.
For instance, HR might need to address the implications for employee shareholders, while the commercial team may handle the financial aspects. External legal counsel is often engaged to ensure the SPA complies with relevant laws and regulations and to manage complex transactions.
Share purchase agreements (SPAs) are used in a variety of scenarios involving the transfer of ownership of shares in a company. Here are some common situations:
When one company acquires another by purchasing its shares, an SPA outlines the terms of the acquisition and the transfer of ownership.
When investors such as venture capitalists or private equity firms buy shares in a company as part of an investment, an SPA is used to document the terms and conditions of the investment.
In management buyouts (MBOs) or leveraged buyouts (LBOs), where a company's management team or an outside entity buys out the existing shareholders, an SPA details the terms of the buyout.
When founders or early investors in a startup decide to sell their shares, an SPA is used to facilitate the sale to new investors or existing shareholders.
When individual shareholders in a private company sell their shares to other individuals or entities, an SPA ensures that the sale terms are clear and legally binding.
In situations where a company is restructuring its ownership or spinning off a subsidiary, an SPA may be used to manage the transfer of shares within the corporate group.
When companies form a joint venture and one party acquires shares in the newly created entity, an SPA outlines the terms of the share purchase.
In family-owned businesses, SPAs can be used as part of succession planning to transfer shares to the next generation or to other family members.
A share purchase agreement template should be comprehensive and cover all essential aspects of the transaction, providing a comprehensive and legally enforceable framework for the sale and purchase of shares that protects both parties. Here is a detailed outline of what a typical SPA template should include:
Title. The document should be clearly labelled “Share Purchase Agreement” at the top of the first page to indicate its purpose and distinguish it from other documents.
Introduction. State the full date of the agreement to establish when it was made. Clearly identify the parties involved, including full legal names, addresses and any other relevant details for both the buyer and the seller.
Recitals. Provide background information that explains the context and purpose of the agreement, including a brief description of the company whose shares are being sold and the intent of the transaction.
Definitions. Define key terms used throughout the agreement, such as "Shares", "Purchase Price", "Closing Date" and any other important contract terminology, to ensure clarity and avoid misunderstandings.
Purchase and sale of shares. Specify the exact number and type (e.g. common, preferred) of shares being sold, including any share certificates or unique identifiers. State clearly the total purchase price for the shares and the method of payment, including any deposit or instalment terms, and the currency to be used.
Conditions precedent. List all specific conditions that must be fulfilled before the transaction can proceed, such as obtaining necessary regulatory approvals, completing due diligence to the satisfaction of the buyer and receiving any required third-party consents.
Representations and warranties. Include detailed statements of fact made by the seller about the ownership, condition and legal status of the shares and the company, as well as statements by the buyer regarding their financial capacity and intent to purchase.
Covenants. Outline the obligations of both parties before and after the completion of the sale, such as the seller's commitment to operate the company in the ordinary course until closing and the buyer's agreement to maintain confidentiality and non-compete agreements.
Indemnities. Specify provisions that protect either the buyer or seller from future liabilities, losses or damages related to the transaction or the company's operations before the sale. This should include any legal costs incurred.
Completion arrangements. Detail the procedures for the closing process, including the exact date, time and location of the closing, and outline the actions to be taken at closing – for example, the transfer of share certificates, payment of the purchase price and delivery of any required documents.
Post-completion obligations. Describe the ongoing responsibilities of both parties after the sale is completed, such as registering the share transfer with the relevant authorities, updating the company's shareholder register and any other actions required to finalize the transfer.
Governing law and dispute resolution. State the legal jurisdiction that will govern the agreement to ensure clarity on which laws apply. Outline the methods for resolving any disputes that may arise, such as arbitration or court proceedings, including the venue and rules to be followed.
Confidentiality. Include clauses that require both parties to keep the terms of the agreement and any sensitive information disclosed during the transaction confidential, and specify the duration of this confidentiality obligation.
Notices. Define the procedures for delivering notices and communications between the parties, including acceptable methods (e.g. email, registered mail), the addresses to be used and the required timing for notices to be considered effective.
Entire agreement. Include a clause stating that the SPA represents the entire agreement between the parties, superseding all prior negotiations, discussions, and agreements, whether written or oral, to make sure that no outside documents or understandings can alter the terms.
Amendments. Specify the conditions under which the agreement can be amended or modified – typically requiring written consent from both parties to ensure any changes are mutually agreed upon and documented.
Signatures. Provide spaces for the signatures of the buyer, seller and any witnesses, along with their printed names and dates, to formally execute the agreement and make it legally binding.
Schedules and exhibits. Attach any additional documents or information referenced in the agreement, such as a detailed list of the company's assets, recent financial statements, a copy of the share certificate, and any other relevant materials that provide context or detail to the agreement.
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Step 1: Initial drafting
Step 2: Customization for specific transactions
Step 3: Collaboration and review
Step 4: Version control
Step 5: Approval process
Step 6: Storage and access
Step 7: Templates for different jurisdictions
Step 8: Regular updates
Step 9: Training and guidance
Step 10: Audit and compliance
Managing share purchase agreement templates manually presents several challenges, particularly in maintaining accuracy and efficiency:
Juro's AI-native contract management platform offers several features that can significantly streamline the management of share purchase agreements, addressing many of the challenges associated with manual processes:
Juro automates the creation, customization and approval processes of SPAs. With automated contract templates and intelligent workflows, repetitive tasks are minimized, as standard clauses and terms can be predefined and reused efficiently. This reduces the risk of human error and speeds up the entire process while ensuring consistency across all documents.
Juro provides a collaborative workspace where all stakeholders can work together in real time. This centralized platform allows for seamless coordination between legal, finance, and executive teams, facilitating clear communication and reducing the likelihood of miscommunications. The platform supports version control, ensuring that everyone is working with the most current document and that changes are tracked and documented.
Juro ensures robust data security with advanced encryption and access control features. Sensitive information within SPAs is protected, and permissions can be managed to ensure that only authorized personnel are able to edit or view specific documents. Juro’s cloud-based system allows for easy access from anywhere, making sure that documents are always available when needed.
Juro’s platform can be configured to ensure compliance with the latest legal and regulatory requirements. It allows for easy updates to templates, ensuring that all agreements are current and legally sound. Additionally, managing templates for different jurisdictions is simplified, as the platform can accommodate various legal requirements and changes.
Juro's AI-native contract automation platform empowers all teams to create, agree, execute and manage contracts up to 10x faster than traditional tools. To find out more, hit the button below to book your personalized demo.
Juro is the #1-rated contract platform globally for speed of implementation.
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