Share Purchase Agreement (Sale by a Company)

What is a share purchase agreement (sale by a Company) and when should you use it?

A share purchase agreement deals with the sale of a company through the sale of shares.

You are selling/purchasing the entire legal entity which makes up the business.

It is quite different from a business asset sale that transfers the assets that make up a business to the buyer.

Assets will usually include tangible (e.g. property, plant and stock) and intangible (e.g. goodwill and intellectual property) assets.

For this type of sale you should use our business sale and purchase agreement (assets only)

This template has been drafted for a relatively simple transaction where there are no subsidiaries and the whole business is being sold as a going concern.

Premises have been included, but the template anticipates that the relevant transfer deeds, assignments and consents have already been agreed with the buyer and will be executed and delivered as part of the completion process.

The template also makes provision for the transfer of all existing employees of the Company in accordance with TUPE Regulations.

Note that this template includes a set of short-form, basic warranties, which may need to be extended depending on the transaction in question.

This template includes any tax provisions or tax warranties.

However, independent tax advice must be sought.

What else might you need?

You might want to consider using a Heads of Terms Agreement where the buyer and the seller have agreed the principal terms of the sale and you want to put them in writing to avoid any misunderstandings and identify any pitfalls before committing to a more formal agreement.

You can use our Heads of Terms template to assist you.

We recommend that before you share any confidential information about your business you get a confidentiality agreement to protect it.

Use our confidentiality agreement to get the protection you need.

This should then be followed by a due diligence of the Company to investigate its financial, tax and sometimes commercial affairs.

You will find our due diligence enquiries template useful for this.

You may also need what is a called a disclosure letter.

This is a letter issued to the Buyer prior to completion of the sale and is designed to protect the Seller from future claims by the Buyer.

You can find our disclosure letter here