The acquisition of shares represents the acquisition of the operational activity of a company. None of the existing contracts with the company change. When a shareholder sells his shares in a company, he achieves a total rupture of the relationship between him and the activity concerned. However, the buyer will insist on a number of contractual commitments concerning the company (guarantees) that will continue to bind the shareholder after the sale. When someone sells their shares in a company, they often hope to get a clean breakup. However, since some corporate commitments – especially when it comes to taxes – are only revealed after the transaction, buyers need to make sure that outgoing owners stay on the hook, and this is one of the main purposes of the main sale document, the share sale agreement. In the event of a sale of shares between two parties, a draft SPA is normally drawn up by the buyer`s legal representatives, since the buyer is most interested in the SPA protecting them from debts after the sale. When a business is sold at an auction, the seller`s lawyers usually draw up a draft contract for the sale of shares and make them available to those interested bidders for consultation. After negotiating the terms of the SPA and the due diligence process, the parties each sign the SPA, the buyer pays the purchase price and the shares are formally transferred to the buyer through a transfer form.
As a rule, this takes place on the same day. When part of the purchase price is retained by the buyer once completed, for example to satisfy copyright arising from the seller`s warranties and indemnities, this may be deposited into a fiduciary account with a third party such as a bank or lawyer. To this end, a mechanism will be put in place to describe trust agreements and predict when and how funds will be released. SpAs also contains detailed information about the buyer and seller. The agreement records all deposits made prior to negotiations and notes a part of the agreement that has already been complied with. The agreement also specifies when the final sale will take place. After closing, the seller of shares assumes no responsibility for the debts of the company that have passed under the responsibility of the new owners. This is due to the fact that a company has a separate legal personality from its directors and shareholders. In comparison, if there is a sale of assets, the seller will retain, with a few exceptions (e.g.B employees), all of the company`s current liabilities, unless he can negotiate with the buyer to take them back with the company. The SPA focuses on the agreement for the seller to sell the shares of the target company and the buyer to buy. Normally, the seller agrees to sell the shares “with full ownership guarantee” – this particular period has the effect that the seller owns the shares in full, has the right to sell them, will do everything in his power to transfer it to the buyer, and the shares are not subject to third party rights or restrictions. Since a share purchase agreement is a private transaction, it usually contains provisions limiting the flow of confidential information and preventing buyers and sellers from disclosing the details of the transaction to third parties.
Similarly, the SPA may contain a clause describing how, where and when announcements about the transaction may be published. The buyer, as a shareholder or director, follows in the footsteps of the seller, but the company`s employees, contracts, real estate, etc., remain the property of the company….