Share Purchase Agreement

A share purchase agreement (SPA) is an agreement between 2 parties in which the seller agrees to sell the stated number of shares to the buyer at a particular price. The aim of the document is to prove that the terms of the agreement were mutually agreed upon. Such an agreement specifies the consideration and the number of shares to be sold, the conditions precedent (the authorizations necessary, for example) and covenants by the parties. The shares will be allotted after this agreement is signed (and on the basis of this agreement).

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Advantages of a Share Purchase Agreement

Due Diligence

An SPA is an essential business practice when a shareholder is being inducted. While many new businesses take a casual approach to such matters, the absence of such a document can have several undesirable consequences.

Protects Parties

Such a document gives both parties the opportunity to protect their interests before the shares are transferred. Being a comprehensive document, it covers every aspect of the transaction and is crucial for both parties to examine each clause covered in the document and understand its meaning.