Share Purchase Agreement (SPA)
A Share Purchase Agreement (SPA) is a legal contract that outlines the terms and conditions under which the sale and purchase of shares in a company will take place. It is a crucial document in mergers and acquisitions (M&A) transactions, where one party (the buyer) intends to purchase shares of a company from another party (the seller).
The SPA serves to formalize the agreement between the buyer and the seller, providing a comprehensive framework that covers various aspects of the transaction.
Purchase price for the shares and how it will be paid, whether in a lump sum or through installments.
Number and Type of Shares: The agreement lists the specific number and type of shares being sold, including any restrictions or special provisions associated with them.
Representations and Warranties: Both the buyer and the seller provide representations and warranties about their respective situations, accuracy of financial information, absence of legal disputes, ownership of shares, and other relevant matters.Covenants and Conditions: The SPA may outline various covenants and conditions that both parties need to fulfill before the transaction is completed. These could include regulatory approvals, third-party consents, and other prerequisites.
Closing Procedures: The agreement details the steps and procedures to be followed on the closing date of the transaction.
Indemnification and Liability: The SPA defines the mechanisms for indemnification if any of the representations and warranties turn out to be false, and it addresses the allocation of liabilities between the buyer and the seller.
Non-Compete and Confidentiality: The agreement contains clauses that prevent the seller from competing with the business after the transaction and that require both parties to maintain confidentiality about the transaction details.
Use it for the transfer of shares in limited liability companies (LLC). It covers the transfer of shares to a third party (bringing a third party into the company) or to another shareholder.