A share purchase usually involves the buyer purchasing the complete company, lock stock and barrel. The documentation would therefore need to be comprehensive and detailed enough to cover every eventuality and would usually include the following:
- Transfer of the shares and new ownership of the company.
- Appointment and removal of directors, company officers, auditors and staff.Â
- Warranties covering all areas of the company and the business.
- Any disclosure by the seller highlighting facts which are not correct or covered by the warranties, usually in the form of a disclosure letter.
- Limiting the liability and time period the seller remains exposed to a breach of warranty.
- The buyer would need to seek specific warranties and disclosure from the seller to avoid over general disclosure.
- Restrictive covenants will need to be put in place to ensure the seller does not compete with the buyer, take their employees, etc. These covenants must not be overly general and must be drafted carefully to ensure that they can be enforced.
- Indemnities – where the buyer has discovered a problem while carrying out the due diligence he may seek an indemnity against any problem arising in the future.
- Tax Indemnity and reimbursement to ensure that all accounts and taxes have been correctly dealt with.Â
- Completion Accounts showing the net position of the company, if the companyÂs position is either better or worse than that which was agreed between the parties, the purchase price would be either increased or decreased. The buyer would then either pay the seller an additional amount or seek a reimbursement from the seller.
- Schedules Â there will be various schedules covering a range of issues set out in the agreement, such as transfer of the pension scheme, listing intellectual property rights and any earn-out formulae, etc.
When it comes to preparing the legal documentation it is usually the buyerÂs solicitors who will carry out this task.