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An agreement known as a "Share Purchase Agreement" is made between a buyer and a seller of shares of a target firm. Typically, share purchase agreements state that the buyer will assume all or a large portion of the company's undertakings. In this case, the purchaser would be assuming not only the company's assets but also its liabilities. Therefore, any prospective buyer must properly assess the firm before engaging in such a deal.
The parties should negotiate and prepare a term sheet outlining the essential provisions of the share purchase agreement before actually drafting one. Due to the fact that all important elements would already have been reached between the parties, this would make the writing and negotiation of the share purchase agreement easier
Clarity of Transaction
By entering into this form of agreement, there remains clarity in transaction and respective proportion of shares allocated to the buyer or the entity.
Rights and Liabilities
The rights and liabilities of the parties are legally prescribed under such an agreement. This would ensure that the parties’ roles and responsibilities arising out the agreement are specified in detail.
All parties to SPA are equally covered by specific warranties specified in the agreement.
No Third-Party Involvement
SPA is a legal contract that is executed between specific parties, hence, there is no scope of involvement of any other third party
First Point of Reference
SPA serves as the first point of reference, in case of any breaches or any misunderstanding arising between the parties in near future.
Contents of a Share Purchase Agreement
Major Clauses of Share Purchase Agreement
The validation of a share purchase agreement depends on the person drafting it. But the beauty of the agreement lies in the transaction which governs the agreement. A share purchase agreement is the crown agreement which every corporate lawyer wishes to draft. Companies Next provide online platform to generate well curated Share Purchase Agreement in line with best industry practices, and also provide option to avail customized Share Purchase Agreement. Our team of experts consist of Chartered Accountants, Company Secretaries, and Lawyers who are having rich experience in the field.