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Share Purchase Agreement

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About Share Purchase Agreement

A Share purchase agreement Format (SPA) is a formal agreement between a purchaser of shares in the company and the buyer, laying down the required terms and conditions. This type of transaction shall include the purchase of a part of the company’s operating business. Upon the transfer of shares as per the agreement’s terms, the ownership shall pass on to the buyer. It shall bring to the buying a certain amount of control and powers in the target business.

Through a Share Purchase Agreement, the buyer steps in the place of the seller. The other elements of the company- contracts, properties etc do not alter in any manner. A share sale/ transfer thus involve no third party involvement and thus is a discreet transaction. Also, in share sale/ transfer, the seller gives up the liabilities of his part (of debts of the business) to the buyer.


A Share Purchase Agreement Format is a considered to be an essential business practice since a casual approach to such transactions and absence of a legally enforceable agreement can bring about consequences which are not desirable to both parties and those related to the transaction of share purchase/transfer. The SPA ensures that due care is taken while formulating the terms and mentioning the rights and liabilities of the parties.

  • The Agreement being formally executed for sale of shares makes the transaction legally accurate and organized by clearly laying out the expectations of the parties.
  • Bring detailed, they cover all the areas involved in the transaction thus making it unambiguous and reduces the possibility of confusion in future.
  • It facilitates the companies to maintain a record of shareholders and includes them in the processes of decision making.
  • Such agreements help the appropriate authority to keep track of similar transactions and enforcing them.
  • Such a legal framework protects the rights and interests of both the seller and the purchaser to minimize the risk of getting conned.
  • The buyer will step into the seller’s shoes as shareholder or director, however, the company’s employee’s , contracts, properties, etc will remain in the company’s ownership. There is therefore, no need for the assets of the company to be transferred, thus a share sale can often be completed without any third party involvement. A share purchase therefore, is often a lot more discreet than an asset purchase.
  • At completion, the seller of shares will have no liability for the debts of the business, which become the responsibility of the new owners. This is because a company has a separate legal personality from its directors and shareholders. By comparison, if there is an asset sale, then, with a few exceptions (e.g. employees), the seller will keep all the current liabilities of the business, unless he can negotiate with the buyer to take them over with the business.


Frequently Asked Questions

The Stock Purchase Agreement ("SPA") is the definitive agreement that finalizes all terms and conditions related to the purchase and sale of the shares of a company. It is different from an Asset Purchase Agreement ("APA") where the assets (not the shares) of a company are being bought/sold

A transfer of shares, also known as a stock transfer, is the process of changing ownership of shares from one shareholder to another in a private limited company.

Each of these are different ways to refer to the changing of ownership of shares.

A completed Stock Transfer Form includes:

  • Company details
  • Consideration (what is being given in exchange for the shares)
  • Share type and value
  • Current shareholders
  • Future shareholders
  • Stamp duty declaration (if needed)

Templates are far too general to do any real good in your business. All of your documents should be tailored made to fit your exact needs. Your legal work should be no exception to this necessity. Another reason templates should be avoided: you never know who drafted it. Not knowing where your legal documents are coming from is a major concern. They can be full of mistakes and inaccuracies.

When the documents are received, the company must cancel the old share certificate and update its register of shareholders. A new transfer certificate is then to be issued to the transferee within two months of the transfer. An issue of shares only becomes binding on a new shareholder when the company notifies them with this stock certificate.


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