What is a Share Purchase Agreement?

A Share Purchase Agreement (SPA) is a contract that outlines the terms and conditions for the purchase and sale of company shares. It is an agreement between the buyer and the seller, where the seller agrees to sell a specified number of shares to the buyer at an agreed-upon price. The primary purpose of this document is to confirm that both parties have mutually agreed to the terms of the transaction.

The SPA details the purchase price, the number of shares being sold, and the conditions precedent and covenants to be fulfilled by both parties. Based on this agreement, the transfer of shares will occur.

The agreement also includes the definition of key terms, affirms the accuracy of the representations made by both the buyer and seller, and provides a mechanism for resolving any disputes. Additionally, it may specify any special tax treatments that either party may be entitled to.

Benefits of a Share Purchase Agreement

Here are the key benefits of a Share Purchase Agreement (SPA):

1. Protection of Interests: In the absence of an SPA, the parties may face undesirable consequences. The SPA ensures that the interests of both the buyer and the seller are safeguarded before the shares are transferred.

2. Comprehensive Coverage: The SPA covers all aspects of the transaction, ensuring that every detail is accounted for. It is crucial for both parties to thoroughly review each clause and understand its implications.

3. Clear Terms: By defining the terms and conditions clearly, the SPA minimizes the risks of misunderstandings or disputes, helping to establish a mutual agreement on the sale and purchase of shares.

4. Legal Security: This agreement provides a legal framework that protects both parties by ensuring that the sale follows the agreed-upon terms and reduces the likelihood of future conflicts.