Share Sale Agreements
Business & Commercial
Newcastle's leading experts in business and commercial law
Share sale agreements involve the owners of shares in a business selling either all or some of the shares they hold to a purchaser. To effect such a sale, a share sale agreement is prepared. Generally, the agreement will include terms stipulating the price, number of shares to be sold, conditions precedent and warranties. In some circumstances the agreement may involve a person operating the business and the shares only being available to purchase if they meet certain key performance indicators which may include attaining a certain level of profit.
Share sale agreements are critical to persons either buying or selling shares. These agreements must protect the interests of the parties involved. In protecting your interests, it is important to understand the rights and responsibilities imposed on you by the agreement. The team at Burgess Thomson have extensive experience in agreements involving the sale of shares, with confidence preparing complex agreements that protect our clients interests.
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Which parties need to be involved in the agreement?
First off, the seller and buyer are the two critical parties to the agreement. However, complexities can arise where you are selling all the shares in the business where there are several shareholders. If this is the case, the agreement must be agreed upon by all shareholders, who each have to be a party to the agreement.
How is the price of the shares calculated?
In a simple transaction, the purchase price could be the fixed price as determined by the market value of the shares. Otherwise, the shares may not be exchanged for money but rather other assets such as shares in another company. In this case, it is important to ensure the value of the shares or assets you will obtain are of a value satisfactory to you.
What pre-sale conditions should be included?
There are many different pre-sale conditions that could be included in an agreement, and which are included will largely depend on the type of business the shares relate to. For example, you may need to get a key supplier to agree to continue supplying certain goods or services after the shares are exchanged. Seeking the advice of a lawyer will be largely beneficial when considering pre-sale conditions.
How can I limit my liability?
To limit your potential liability, it is important to include limitations in the agreement. It is recommended to establish specific conditions which must be satisfied in order for a claim to be brought against you. Specifically, you may wish to include a condition in the agreement that an action can only be brought in the first 12 months after the transaction or that your liability is limited to a certain amount.