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Maggie Beer, the doyen of duck liver pate and vendor of verjuice, recently sold a minority stake in the business she began in 1979. The buyer, Primary Opinion Limited, paid $15 million for the minority share as part of a plan to expand its investment portfolio. However, we know the real reason behind the deal – unlimited access to Maggie’s burnt fig, honeycomb and caramel ice-cream.

While $15 million is not a bad price, Maggie Beer’s lawyers no doubt sealed the deal (like the vacuum seal atop a pot of spiced pear paste) with an appropriately drafted share sale agreement and ancillary documents. Below, we look at selling shares, what you will need to sell shares, how to ensure that you are appropriately compensated and legally protected.

Selling the Family Farm?

Share sales usually occur in two ways. Either a shareholder chooses to leave the business entirely (selling all shares to the purchaser) or a shareholder only sells part of their stake in the business. In Maggie Beer’s case, she chose to do the latter and sell a part of her shareholding to Primary Opinion Limited.

What Can the Funds Be Used For?

It is a common mistaken belief that funds received from a share sale are funnelled directly back to the company for reinvestment.

In a share sale, the person who sold the shares receives the cash, not the company. It is one way for a shareholder to generate a return on their shareholding. Beer is free to use the funds she receives as she wishes – she could provide the funds to her company Maggie Beer Products Pty Ltd or she can use the funds for her personal use.

Share sales must be distinguished from a share issue, where a company issues shares and the funds paid for the shares are provided directly and automatically back to the company.

What Documents Are Needed in a Share Sale?

There are a few legal documents that you will need to draft and sign, hopefully over a nice glass of Penfolds Grange, before you can initiate and complete the sale of shares. These are:

Share Sale Agreement: A share sale agreement is needed to set out the terms of the deal. This document sets out the purchase price, number of shares, any applicable payment terms and clauses that protect the seller of shares.

Ancillary documents: Maggie Beer Products Pty Ltd needs to approve the sale. The documents needed include: 

  • Shareholders Resolution (approving of the sale); 
  • Board minutes (also to show approval of the sale); and
  • Share transfer form (showing the transfer of shares from Beer to Primary Opinion).

Importantly, the Australian Securities and Investment Commission (ASIC) needs to be updated. For a more in-depth look at what documents you will need to effect a Share Sale, see our article.

Protect the Beer!

Share sales involve considerable risk and a person in Maggie Beer’s situation should ensure she is legally protected and require Primary Opinion Limited to provide her with warranties.

In any share sale, the seller of shares should ask the purchaser to warrant (or promise) that:

  • Entering into the agreement does not breach any existing obligations;
  • It has full power and capacity to perform its obligations under the share sale agreement;
  • It will enter into the company’s shareholders agreement;
  • It is entering into the share sale agreement on its own account and not on behalf of another person or entity; or
  • It is not going into liquidation or is insolvent.

Key Takeaways

Share sales are one way a shareholder can make a return on their shares. A shareholder who sells their shares is free to use the funds as they please and does not need to give the funds back to the company. 

A person in Maggie Beer’s situation should seek a suite of representations and warranties from Primary Opinion Limited, such as the promise that Primary Opinion Limited is not breaching any other existing agreements it may have with other parties by entering into the agreement with Beer. The legal documents Beer needs to seal the deal include a share sale agreement and the ancillary documents mentioned above. 

If you have questions about buying selling or issuing shares, get in touch with one of our business lawyers on 1300 544 755.


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