The share purchase agreement (SPA) is a legal document that outlines the terms of the sale and purchase of shares in a company. When individual sellers are involved in an SPA, the process can become more complex. In this article, we will explore the key considerations when drafting an SPA involving individual sellers.
Firstly, it is important to identify the individual sellers and ensure that they have the authority to sell the shares. This may involve reviewing the company`s articles of association and shareholder agreements to confirm the sellers` rights to transfer their shares.
Next, the SPA should specify the details of the shares being sold, including the number of shares, the class of shares, and any restrictions or special rights attached to the shares. It is also important to determine the purchase price and payment terms for the shares.
The SPA should also address any representations and warranties provided by the individual sellers. These may include confirming that the sellers are the legal owners of the shares, that the shares are not subject to any liens or encumbrances, and that the sellers have the authority to sell the shares.
In addition, the SPA may include non-compete clauses that prevent the individual sellers from competing with the company after the sale of the shares. This is particularly relevant if the sellers are directors or key employees of the company.
Finally, it is important to consider the tax implications of the SPA for the individual sellers. Depending on the jurisdiction, there may be capital gains or income tax obligations that need to be factored into the sale price and payment terms.
In conclusion, an SPA involving individual sellers requires careful consideration of the sellers` authority to sell the shares, the details of the shares being sold, representations and warranties, non-compete clauses, and tax implications. By addressing these key considerations, the parties can ensure a smooth and successful transaction.
