SHARE PURCHASE AGREEMENT
- Aug 3, 2022
- 2 min read
Written by Shweta Pandit, Lawyer
While drafting a share purchase agreement today, I learned the following things, which can be helpful for you in drafting a share purchase agreement or if you draft a share purchase agreement for your own business.
Introduction:
The share purchase agreement is a document that contains the points related to the transaction between the share seller and the share buyer, like the number of shares at a stated price.
Share sellers could be singular or plural entities, companies, individuals, within the same organization, or outside the organization.
The share purchase process must be initiated by informing the director of the company about the intention of share selling. You can simply write a notice of intent that you are willing to sell your shares. Director then lets other existing shareholders, if any, in the company know about the availability of shares, and if no one comes up to take those shares, the share seller then may sell the shares to an outside purchaser.
Clauses of Share Purchase Agreement
The share purchase agreement has a few basic clauses like:
1. EXECUTION DATE AND EFFECTIVE DATE
The execution date is 17/8/2022, and the effective date is 17/9/2022
2. RECITALS
The company is engaged in the business of retail services.
The seller is willing to sell his shares.
Purchaser is willing to purchase the selling shares.
3. CAPITAL STRUCTURE OF THE COMPANY
The authorized capital of the company is - 1 Lakh.
The paid-up share capital of the company is - 1 Lakh.
4. OPERATIVE CLAUSE OF SALE AND PURCHASE OF SHARES
Share seller hereby agrees to sell, transfer, and deliver sale shares, and the purchaser agrees to purchase, acquire, and accept the sale shares.
Share Seller shall transfer shares to the purchaser at the given price on the execution date.
5. CONSIDERATION
Share purchaser agrees to pay the seller a total amount of INR 36000/-
6. CONDITION PRECEDENT
Seller shall have provided the Purchaser with the certified true copies of the resolutions of its board of directors, approving this agreement and performance of transaction of this agreement.
7. REPRESENTATION AND WARRANTIES
Seller warrants that shares are free from all encumbrances, lien, charges, or other interests.
Purchaser warrants that he is financially competent to buy the shares.
8. CLOSING
This agreement shall come to completion on the fulfilment of the conditions mentioned in this agreement.
After the completion of the share purchase agreement, get it signed by the seller, and purchaser, fill out, execute the SH4 form and submit the share certificate, SH-4 form, share purchase agreement to the company and get the updated share certificate from the company.
Conclusion:
The share purchase agreement is a legally binding document. It protects the rights and interests of the parties and helps the managerial authorities in maintaining checks over such settlements.
Important nitty-gritty of the SHARE PURCHASE AGREEMENT, including the basic clauses that are used in drafting the agreement.
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