Sale of Member’s Interest Agreement – in part, to an existing member

CONTRACT TO SELL MEMBERS INTEREST

In part, to an existing member

Summary A contract to sell members interest is useful when a business owner sells some of their Member’s Interest in a Close Corporation to a purchaser, where the buyer is already an existing member of the Close Corporation. This Sale of Member’s Interest Agreement includes reference to the purchase price and confidentiality, amongst other provisions. The Agreement caters for more than one member selling portion of their Member’s Interest, if applicable.

Why do I need a contract to sell member’s interest? A written agreement for the sale of member’s interest in a CC sets out the terms of the sale of the member’s equity to another member. A number of issues need to be negotiated during a Close Corporation’s sale of equity, such as the purchase price, confidentiality and warranties. These issues need to be included in a written contract governing the Sale of Member’s Interest to eliminate uncertainty and ensure that both the sellers and the purchaser understand their respective rights and obligations during the sale.

What does the agreement say? The sample sale of interest agreement consists of: Parties; Definitions; Sale of Member’s Interest; Purchase price and payment; Delivery of documents; Warranties; Indemnities; Breach; Confidentiality; Dispute Resolution; Pre-emptive rights; Notices; General.

Note: if the entity is a private company, you’ll need a Sale of Shares Agreement.

What does the Agreement look like? The template sale agreement can be printed onto eight pages.

What do you need to do to use the Agreement?

• Read the sample Sale of Member’s Interest contract to ensure that it suits your requirements, and make changes as required. The Agreement can be used for one or more members selling Member’s Interest, in which event clause 1 (Parties), clause 14 (Signatures) and Annexure 1 (Sale details) can be adjusted accordingly.
• Complete the relevant details, such as the details of the Seller/s and Purchaser, the name of the Close Corporation and the purchase price and terms in Annexure 1. Ensure that any blanks in the document have been completed.
• Ensure all the parties sign the agreement and receive a copy.
• The members should also consider reviewing their Members’ Agreement.

Also viewed:

• Sale of Member’s Interest Agreement – in total to an existing member
• Sale of Member’s Interest Agreement – in part to a non-member
• Sale of Member’s Interest Agreement – in total to a non-member

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