Share Sale Agreements

If you are thinking to buy or sell shares in a company, it’s important you have a detailed share sale agreement that sets out the terms of the share sale process.

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Thinking to buy or sell shares in a company?

To ensure you meet your legal requirements as well being adequately protected, your agreement will need to address (in detail) the following items.

  • The number of shares being bought or sold
  • The purchase price for the shares
  • When and where the sale completion will take place
  • How payment(s) will be made. This could be a one-off payment at completion or instalments to be paid over time
  • A full set of warranties to be provided by the seller of the shares.

The share sale agreement normally consists of three parties:

  • Seller
  • Buyer
  • Company

Key agreement inclusions

A share sale agreement can be complex and inclusions and inputs are ultimately determined on a case by case basis. This noted, there are general areas that must be considered.

1. Share details

Share sale price and number of shares to be sold should be accurately and correctly noted in the agreement.

2. Tile, property and risk

It is important all parties know when title, property and risk passes from the seller to the purchaser. This determines legal liability throughout the process. 

3. Rights and obligations

The agreement should detail both the seller and purchaser’s rights and obligations concerning the share sale at pre-sale, during, and post-sale completion.

4. Confidentiality

Naturally there will be sensitive information shared between the parties during the process. A confidentiality clause ensures this information remains between those involved.

5. Indemnity

To prevent indemnity disputes where (or if) the seller should indemnify the purchaser, indemnity clauses should be included in the agreement. As an example, if the seller breaches the terms of the contract, these clauses would provide the grounds for the purchaser to be indemnified.

6. Restraint

Including restraints in the agreement on the types of business and geographic area that can be established by the seller, protects the buyer particularly if they’re buying a large portion of the seller’s business.

As part of a share sale agreement, there are many other considerations in the overall process such as share transfer forms, share certificates and notifications to ASIC.  It is important you seek professional and experienced legal advice on all these areas when considering a share sales agreement.

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