A practical guide to a share purchase agreement with multiple sellers
A share purchase agreement (SPA) is a crucial document for any buying and selling of shares. It is a legal contract that outlines the terms and conditions of the sale and purchase of shares in a company. When there are multiple sellers involved in a share purchase, the SPA can become more complex.
This article provides a practical guide to navigating a share purchase agreement with multiple sellers, specifically focusing on the purchase of shares in a company governed by the laws of England and Wales.
Important considerations
Before entering into any SPA, it is essential to consider the following:
1. Due diligence – It is important to carry out due diligence to ensure that the company to be acquired is worth the purchase price. Due diligence involves reviewing the company`s financial statements, legal and tax documents, operational procedures, and other relevant information.
2. Consideration – The purchase price must be agreed on by both parties and be based on fair market value. The consideration may be in the form of cash, shares, or a combination of both.
3. Completion – The date of completion must be mutually agreed upon and documented in the SPA. Completion can be subject to conditions that must be met before the sale takes place.
4. Warranties and representations – Both parties must provide warranties and representations relating to the company`s operations, assets, and liabilities. These warranties and representations must be documented in the SPA.
5. The sellers – The sellers must be identified, and their details must be documented in the SPA. The SPA must also specify the allocation of the purchase price among the sellers.
Multiple sellers
When there are multiple sellers involved in a share purchase agreement, some additional considerations come into play:
1. Joint and several liability – The sellers may be jointly and severally liable for any breaches of warranties and representations given in the SPA. This means that if one seller breaches their warranty, the other sellers may be liable for the breach.
2. Proportional liability – The SPA may provide for proportional liability among the sellers for breaches of warranties and representations. This means that each seller will only be liable for their percentage share of any claims.
3. Indemnities – The SPA may provide for indemnities from each seller to the buyer. This means that if there is an issue with the company`s operations, assets, or liabilities, the buyer can claim compensation from the sellers.
4. Sellers` warranties – The sellers must provide warranties and representations that are true and accurate. It is essential to ensure that all sellers` warranties are fully documented in the SPA, and each seller provides their warranties separately.
5. Share allocation – The SPA must specify how the shares will be allocated among the sellers. If the SPA does not specify the allocation, the sellers may be entitled to equal shares of the purchase price.
Conclusion
In conclusion, when entering into a share purchase agreement with multiple sellers, there are various considerations that need to be taken into account. Due diligence, consideration, completion, warranties, and representations are all essential components of the SPA. Joint and several liability, proportional liability, indemnities, sellers` warranties, and share allocation are other critical factors to consider. Working with an experienced legal professional and carrying out thorough due diligence will help ensure a smooth and successful share purchase agreement.