Are you looking to purchase or sell a business that is owned by a company or create an arrangement to work with another business?
Dealing with the complicated laws surrounding the acquisition or sale of shares can be difficult to navigate without a corporate lawyer. GLG Legal is able to assist you with managing the sale or purchase of shares to ensure that the transaction is risk free and completed as efficiently as possible. We are able to assist you with your due diligence process through to the drafting of the contract for the sale of the shares and ensure that the transaction is completed in accordance with the standards of ASIC.
What is a share sale and what is a share acquisition?
Aptly named, share sales and acquisitions refer to the process whereby an individual or corporation sells or purchases (i.e., acquires) shares in a business. Share sales and acquisitions is a common legal method to either sell your business in the case of a share sale, or take over a business wholly or to a certain extent in the case of a share acquisition. It is an alternative method to sell a business as opposed to selling the assets of a business.
Acquiring and selling shares can be a complex process due to the legal considerations involved. These legal considerations are often outlined in a share sale and/or purchase agreement. We recommend seeking legal advice prior to signing a share sale and/or purchase agreement to ensure that your interests are protected.
What is contained within a share sale and/or purchase agreement?
Depending on your circumstances, the clauses contained within a share sale and/or share purchase agreement will vary. It is important to seek legal advice during the negotiation stage when purchasing or selling shares to ensure that your interests are protected when the share sale and/or purchase agreement is drafted.
A few of the common clauses contained within a share sale and/or purchase agreement include:
Clause outlining the sale and purchase of the shares
As shares are considered to be personal property, it is important that they are sold without any encumbrances or third-party interests (including any interests under the PPSA) attached to the shares. In this clause, the seller will outline whether anything is affecting the shares however, it is up to the purchaser to conduct due diligence investigations as well.
Should there be any interests or encumbrances on the shares, it is the obligation of the seller to discharge these prior to the sale of the shares to the purchaser.
Purchase price of the shares
As with any purchase agreement, clauses pertaining to the purchase price of the goods being transferred is a necessity. This clause will often outline other contingencies as well such as whether it can be paid by instalments, how the payment/s must occur, whether finance is being sought by the buyer, if a deposit is required, etc.
It is important to negotiate a purchase price that is suitable for you and payment terms which you will be able to meet.
This clause outlines the obligations that each party has to satisfy in order for the share sale and/or purchase to complete. Unlike a conveyancing transaction where completion occurs on the settlement date, there are often various obligations by both parties in a share sale and acquisition transaction post-completion. These will vary depending on what is contained within the agreement so it is recommended that you seek the advice from a lawyer who will be able to outline your obligations under the agreement.
Warranties by the seller
If you are purchasing shares, it is crucial for you to obtain warranties from the seller to protect your own interests. By having warranties, it will force the seller to disclose any material issues pertaining to the shares. If such disclosures are substantial, this will enable you to potentially seek a reduction on the purchase price.
By requiring warranties from the seller in the agreement, it will provide the purchaser with a remedy post-completion should any of the warranties be false or incomplete. In certain cases, you may be able to seek a price reduction on this basis post-completion.
Are you looking to purchase or sell a business that is owned by a company or create an arrangement to work with another business? As registered agents of ASIC we aim to ensure that you understand the fundamentals of the transaction while we deal with all of the details.