What Is A Purchase Agreement For A Business

A Share Purchase Agreement (SPA) is a legally binding contract entered into by sellers of shares and purchasers or incoming investors. This agreement is prevalent across various businesses but is commonly utilized when an incoming shareholder seeks to invest capital in a company or when an existing shareholder intends to sell shares to a third party. Typically executed before finalizing an investment deal, the SPA outlines the terms agreed upon by the involved parties. The following example illustrates the key components often found in a share purchase agreement:

1. **Transfer of Purchase Shares:**
– The purchasers agree to buy, and the sellers agree to transfer and deliver, the purchase shares, unencumbered and with all attached and accrued rights.
– The purchase price, determined in advance, serves as full and final payment for the purchase shares.

2. **Equity Rights and Dividends:**
– The transferred shares rank pari passu with other equity shares, ensuring entitlement to proportionate dividends and other distributions related to the company’s equity capital.

3. **Covenants and Undertakings:**
– The sellers and the company commit not to engage in any commitments or transactions that could adversely impact the share transfer.
– They pledge not to breach any terms of the agreement and confirm the absence of material litigation against the company.

4. **Exercise of Voting Rights:**
– The sellers undertake to exercise their voting rights to ensure the company complies with the SPA, including amending charter documents if required.

5. **Governing Law and Dispute Resolution:**
– The agreement specifies the governing law, the mechanism for dispute resolution, and the jurisdiction for any legal matters.

This example outlines the core provisions of a share purchase agreement, providing a comprehensive understanding between sellers and purchasers regarding the transaction. For detailed legal advice and a thorough understanding of share purchase agreements and related laws, businesses can seek assistance from Evaluer, a service specializing in drafting commercial contracts and offering expert legal guidance.

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