Sale of Shares Agreement – in part, to an existing shareholder

SALE OF SHARES AGREEMENT

In part, to an existing shareholder

Summary

A written agreement to sell shares can be used when a shareholder sells some of the shares that they own in a Company to a purchaser, where the purchaser is already an existing shareholder of the Company. A Sale of Shares Agreement includes reference to the purchase price and confidentiality, amongst other provisions. The Agreement caters for more than one Shareholder selling portion of their shares, if applicable.

Why do I need a written sale of shares agreement?

A written Sale of Shares Agreement sets out the terms of the sale of a shareholder’s shares in a Company to another shareholder. A number of issues need to be negotiated during a Company’s sale of equity, such as the purchase price, confidentiality and warranties. These issues need to be included in a written contract to sell shares, 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 template contract consists of: Parties; Definitions; Sale of shares; Purchase price and payment; Delivery of documents; Warranties; Indemnities; Breach; Confidentiality; Dispute Resolution; Pre-emptive rights; Notices; General.

Note: if the entity is a close corporation, a Sale of Member’s Interest Agreement will be required.

What does the contract look like?

The template sale of shares contract can be printed onto eight pages.

What do you need to do to use the Sale of Shares 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 shareholders selling shares, 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 Company 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 shareholders may need to review their Shareholders Agreement.

Also viewed:

• Sale of Shares Agreement: in total to an existing shareholder
• Sale of Shares Agreement: in part to a non-shareholder
• Sale of Shares Agreement: in total to a non-shareholder

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