A share sale agreement (SSA) applies when a private company sells any shares. The share sale agreement clarifies each party’s legal rights and the buyer will be relying on their own due diligence to minimise the risks of the deal. This article explains the key terms a share sale agreement should have to allow the sale to go smoothly.

Key Sale Terms

A share sale agreement will contain four key terms:

  1. Parties;
  2. Shares — both number and type;
  3. Purchase price and how the buyer will pay; and
  4. Completion — how the sale will be finalised.


Both the seller and buyer should be parties to the share sale agreement. However, a party may be just a holding entity for the shares with little or no assets. This presents a problem if the other party later tries to recover damages should something go wrong. Therefore, to minimise risk, the share sale agreement should require that party to join with another party that can guarantee its obligations.


The share sale agreement should set out both the number and type of shares to be sold. Understanding the type is important, as there are critical differences between share types. For example, shares may differ in terms of:

  • voting rights;
  • whether they give the holder first preference to a payout in the event of insolvency; and
  • whether the shares are fully or partly paid.

Purchase Price

The share sale agreement should include the purchase price and how the buyer will pay. These terms may address details such as:

  • whether it will be a fixed price;
  • if the seller will accept instalment payments;
  • whether the buyer must pay a deposit;
  • the acceptable currency, such as cash or shares in another company; and
  • if the seller can adjust the purchase price.


Completion happens when the seller transfers the shares to the buyer. The share sale agreement should specify when, where and how completion will take place. This will include describing what each party must do to ensure the shares are correctly transferred.

The share sale agreement should also address what is to happen if completion does not take place at the agreed time. For example, whether:

  • the seller must pay interest; or
  • the buyer can walk away from the sale.

Furthermore, if the completion date will take place after the agreement is signed, the agreement should state how the seller will conduct the business between now and then. The buyer will want the seller to use their best efforts to maintain the business’ profitability.

Other Terms in the Share Sale Agreement

In addition to the key sale terms, the share sale agreement may also address:

  • pre-sale conditions;
  • the seller’s obligations after the sale;
  • warranties the buyer and seller will give; and
  • the dispute resolution and termination procedures.

Pre-sale Conditions

The SSA should state whether the sale is subject to any conditions that either party must satisfy or waive before the transfer of shares takes place. It should also state what will happen should these conditions not be met.

A common condition is a confidentiality obligation — that each party will keep the sale secret until a specified date. This condition will detail when and how the parties will announce the sale to the market and any key suppliers, customers or employees.

Seller’s Obligations After the Sale

The agreement will detail how the seller must act after the sale. Notably, whether the seller will be subject to a restraint of trade clause. This will stop the seller from starting up a competing business for a period of time, giving the new buyer room to grow the business.

A typical provision is whether the seller must provide any assistance to the buyer after the sale. For example, whether the seller will continue to work in, or consult to the business. Any ongoing relationship may need to be formalised in a separate agreement such as:


To provide extra security, the share sale agreement may also specify what warranties each party will provide to each other. Warranties are promises that if they turn out to be false, allow the other party recourse, such as compensation or the option to terminate the agreement. Typical buyer warranties will relate to their power and authority to enter the agreement. Typical seller warranties relate to the availability of the shares and the business’ profitability.

Often, warranties will be limited by time or money. This prevents the buyer or seller claiming a warranty ten years after the sale.

Dispute Resolution and Termination

Disputes may arise during or after the sales process. For example, where the purchase price is adjusted after the sale, the parties may differ on the calculation method used. Therefore, the share sale agreement should have a specified process to resolve these quickly. 

Similarly, the agreement should specify when the agreement can be terminated if the dispute resolution process fails. The termination provisions should also address the consequences for termination — whether the parties can just walk away, or whether anyone owes compensation.

Key Takeaways

A share sale agreement minimises the risk involved in buying or selling shares in a private company. A good agreement will address every possible contingency, allowing this complex transaction to be completed with the minimum of risk.  

If you need a share sale agreement drafted or reviewed, call LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

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