Non-Member Agreement – Sale of Member Interest

SALE OF MEMBERS INTEREST AGREEMENT

In total, to a non-member

Summary A Sale of Members Interest Agreement may be used when a member sells all the member’s interest that they own in a Close Corporation to a purchaser, where the purchaser is not an existing member of the CC. A written Sale of Member’s Interest Agreement includes reference to due diligence and warranties, amongst other detailed provisions. This Agreement caters for more than one Member selling their member’s interest, if applicable.

Why do I need a contract for selling member’s interest? An Agreement for the Sale of Member’s Interest sets out the terms of the sale of a member’s share in a Close Corporation to another person. A number of issues need to be negotiated during a business’ sale of equity, such as the purchase price, the due diligence process, the handover process, confidentiality, restraints and warranties. These issues need to be included in the Sale of Member’s Interest Agreement to eliminate uncertainty and ensure that both sellers and the purchaser understand their respective rights and obligations during the sale.

What does the contract say? This template agreement consists of: Parties; Definitions; Sale of Member’s Interest; Suspensive Conditions; Purchase price and payment; Delivery of documents; Due diligence; 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 agreement look like? The sale of interest contract template can be printed onto fourteen pages.

What do you need to do to use the agreement?

• Read the sample document 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 17 (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 want to review their Member’s Agreement.

Also viewed:

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

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