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.
- 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
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