Share Purchase Agreement: group

Share Purchase Agreement: group

Share Purchase Agreement for the purchase of a group of companies from a single seller

Background

What are the main features of a Share Purchase Agreement?

The Share Purchase Agreement (SPA) is the principal legal document for a share purchase transaction.

The first draft SPA is usually prepared by the buyer.  An exception is in the case of a competitive auction process, where the seller may provide a draft SPA for review and comment by the competing bidders for the company.

The main features of an SPA are:

• sale and purchase: the mechanics for the sale and purchase of the target company shares and closing of the transaction
• conditions: any conditions that need to be satisfied prior to closing
• consideration: the consideration to be paid by the buyer, including the form of consideration (cash, shares or a combination), upfront consideration paid on closing, deferred consideration, earnout consideration and adjustment for the net assets of the target company on the business of completion accounts
• warranties: warranties from the seller about the target company, its business, finances, assets, intellectual property, contracts, liabilities and tax history
• indemnities: any specific indemnities identified during the due diligence and disclosure process and, usually, a tax indemnity relating to pre-closing tax liabilities and compliance
• restrictive covenants: covenants prohibiting the seller from competing with the target company and soliciting the target company’s customers, suppliers and employees for a period following closing of the transaction

About this Share Purchase Agreement

This Share Purchase Agreement is for the purchase of a group of companies from a single seller.

The document is suitable for a transaction on the following terms:

• • simultaneous signature and completion of the acquisition, with no closing conditions
  • payment of the entire consideration in cash at completion

Document features

Features include:

• full-form SPA with 22 clauses and 4 schedules over 35 pages
• process for the sale and purchase of shares and completion deliverables
• warranties from the seller relating to the target group
• seller limitations from liability under the warranties
• provision for indemnities for specific issues
• restrictive covenants from the seller
• tax covenant for pre-completion tax liabilities

Explanatory guidance

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