If you need solicitors to draft a Share Purchase Agreement, advise on a contract offered to you or, more likely, you need lawyers generally to advise on an agreed investment into a business or purchase of a business, please do contact us.
Solicitors for a Share Purchase Agreement
There are 2 main situations where a Share Purchase Agreement (“SPA”) are most relevant. These are
- Where a controlling shareholding or entire shareholding in a company is sold
- Where an investment is made into a company.
With the 2nd of these options, the share purchase agreement may be considerably shorter than with a sale of the company and there will be some differences in other documents associated with the transaction. For example, with private equity investment a key document may be a revised shareholder agreement or a completely new shareholder agreement containing many of the protections that the investor requires.
Key clauses and issues
In almost every Share Purchase Agreement, negotiations will generally centre on key aspects including :
Representations, warranties and disclosures – generally the seller will want to restrict warranties as far as possible and the buyer will want to have some legal redress if information given is not accurate. Items included typically include confirmation on key contracts of the underlying business, assurances about legal disputes or that there are none and perhaps most important of all that the accounts and management accounts are accurate.
Purchase price – will it be paid in full on completion of the transaction or in staged payments over a period of time post completion? The latter can also include earn out provisions whereby the seller will only receive part of the agreed consideration if certain defined performance conditions are met.
Default and termination – not every breach of a contract gives the wronged party the right to terminate. With an important contract such as a Share Purchase Agreement, it will be key to define the consequences of certain breaches clearly.
Restrictive covenants and non-competition – with many businesses, especially small businesses, the historical performance, contacts and know how are associated with a small number of employees who may also be the outgoing shareholders. New owners of the business will want to ensure that such key employees do not set up in competition.
Retention of key staff – with smaller businesses where the selling shareholders are key employees, guaranteeing retention of those employees for a period is often vital.
Clients understandably almost always want a transaction to go through as quickly and at the minimum legal cost. We fully understand this especially when it comes to an SPA transaction for a small business or family owned business.
It is important to understand that an SPA is a complex document and that in almost all transactions, there will be areas of negotiation and haggling between the parties and their lawyers.
Transaction involving investment into a company or the sale of a controlling shareholding will also involve many other essential steps and documents in addition to a Share Purchase Agreement. These can include :
- If the SPA relates to investment rather than purchase of the business, a shareholder agreement
- Due diligence
- Corporate requirements such as Board Resolutions, Board minutes and forma; resignations of existing shareholders and directors.
- Ensuring that all required consents to the transactions from existing shareholders are in place
- Confidentiality and non-disclosure agreements
- An often very detailed disclosure letter which impact on warranties and indemnities the sellers will agree to give,
- Dealing with any employment law issues associated with the share transfer.
- Dealing with any IP related issues.
- Checking any contracts for the business relating to Change of Control clauses.
Solicitors for a Share Purchase agreement or share transfer
Our commercial lawyers are highly experienced, focused and practical. We are adept at striking the right balance between grasping the important detail and protecting against risks and liabilities set against the need to ensure legal costs are proportionate and speed in getting the transfer or investment through as rapidly as possible.
Please do get in contact. We’d be delighted to speak to you about your transaction, whichever side you are on and in speaking with us you can assure yourself that we are the right lawyers for you.