When a business owner decides to sell a portion of their company, it`s important to have a thorough and legally binding document in place. That`s where a small business share purchase agreement comes in.
A share purchase agreement (SPA) is a legal contract that outlines the terms and conditions of a sale of shares in a company. This document is typically used when a business owner wants to sell a portion of their company to another individual or entity, such as an investor.
There are several key components that should be included in a small business share purchase agreement. These include:
1. Purchase Price and Payment Terms
The SPA should specify the purchase price for the shares being sold, as well as the payment terms (e.g. lump sum payment or installment payments)
2. Number of Shares and Percentage of Ownership
The agreement should also specify the number of shares being sold, as well as the percentage of ownership that the purchaser will have in the company.
3. Representations and Warranties
Both the seller and purchaser need to make certain representations and warranties in the agreement. These might include statements about the accuracy of financial statements, compliance with laws and regulations, and ownership of the shares being sold.
4. Conditions of Sale
The SPA should outline any conditions that must be satisfied before the sale can be completed. For example, the agreement might require certain approvals from regulatory bodies or lenders.
5. Governing Law and Dispute Resolution
The agreement should specify the governing law for the contract and how any disputes will be resolved.
6. Confidentiality and Non-Disclosure
To protect the confidentiality of the transaction, a non-disclosure clause should be included in the SPA.
A well-drafted small business share purchase agreement can help protect both the seller and purchaser in a sale of shares. It`s important to work with a qualified attorney who can draft a document that meets the specific needs of your business.
In conclusion, small business share purchase agreements are crucial for any business owner looking to sell a portion of their company. By including key components such as purchase price, number of shares, representations and warranties, conditions of sale, governing law and dispute resolution, and confidentiality and non-disclosure clauses, business owners can ensure that the transaction is legally binding and protects both parties involved in the sale of the shares.