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

SALE OF MEMBER’S INTEREST AGREEMENT

In total, to an existing member

Summary A Sale of Member’s Interest Agreement may be used when a member sells all the Member’s Interest that they own in a Close Corporation to an existing member of the Close Corporation. A Sale of Members Interest contract includes reference to confidentiality and restraints, amongst other detailed provisions. The Agreement caters for more than one Member selling their Member’s Interest, if applicable.

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

What does the agreement say? The template sale agreement consists of: Parties; Definitions; Sale of Member’s Interest; Suspensive Conditions; Purchase price and payment; Delivery of documents; Warranties; Indemnities; Breach; Restraint of Trade; 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 contract look like? The sample agreement can be printed onto ten pages.

What do you need to do to use the agreement?

• Read the sample agreement template to ensure that it suits your requirements, and make changes as required. The Agreement can be used for one or more members selling Members Interest, in which event clause 1 (Parties), clause 16 (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 remaining members may also need to review their Members’ Agreement.

Also viewed:

• Sale of Member’s Interest Agreement: in part 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

The benefits and Use of a Sale of Members interest agreement:

A sale of members interest agreement is a legally binding agreement that outlines the sale of a membership interests from one member to another in a close corporation. This very detailed agreement includes clauses related to the purchase price, relevant confidentiality arrangements, and resolving of any dispute . Some important elements of this agreement are:

• Member interest: Refers to the ownership interest in the underlying business of the close corporation.
• Purchase price: The amount of money that the existing member agrees to sell their member interest in the underlying business for.
• Confidentiality arrangements: to ensure a very detailed agreement this agreement includes clauses such as relevant confidentiality agreements to protect each member’s interest, unilaterally applicable confidentiality undertaking, any necessary individual confidentiality undertaking and necessary confidentiality document(s) to ensure the confidentiality of the sale which are added onto the latter legal documents.
• Dispute resolution: The process to resolve any disputes that may arise during the sale agreement.
• Notes and Notices: Very detailed drafting notes assist and are necessary to ensure that the agreement covers all relevant legal paperwork and the detailed drafting notes assist in necessary confidentiality undertakings. We ensure that all of our agreements have extensive drafting notes for each agreement relating to clauses such as confidentiality, and several drafting notes relating to other such clauses.
• Legally substantive: The agreement is very detailed and legally binding to ensure that both parties are protected.
• Purchase: Claims Purchase consideration/ claims agreement that the existing member receives in exchange for their membership interest.

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