Sale of Shares Agreement – in part, to a non-shareholder

SALE OF SHARES AGREEMENT

In part, to a non-shareholder

Summary A written contract to sell shares may be used when a shareholder sells some (but not all) of the shares that they own in a Company to a purchaser, where the purchaser is not an existing shareholder of the Company. Ie. after the sale of shares, the seller will remain a shareholder in the business. A Sale of Shares Agreement includes reference to due diligence and warranties, amongst other detailed provisions. The Agreement caters for more than one Shareholder selling a portion of their shares, if applicable.

Why do I need a written contract to sell shares? An agreement for the sale of shares in a company sets out the terms of the sale. A number of issues need to be negotiated during a Company’s sale of equity, such as the purchase price, the due diligence process, confidentiality and warranties. These issues need to be included in the Sale of Shares Agreement 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? This template contract for the sale of shares in a company consists of: Parties; Definitions; Sale of shares; Suspensive Conditions; Purchase price and payment; Delivery of documents; Due diligence; Warranties; Indemnities; Restraints; Breach; Confidentiality; Dispute Resolution; Pre-emptive rights; Notices; General.

Note: if the entity is a close corporation, then you’ll need a Sale of Member’s Interest Agreement.

What does the contract look like? The template agreement can be printed onto thirteen pages.

What do you need to do to use this Agreement?

• Read the sample contract 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 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 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 should also review their Shareholders Agreement.

Also viewed:

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

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