Are you buying shares in a company? Are you selling shares in your company to a new investor? If you answered yes to either of those questions, you’re going to need some legal documents drawn up for your Share Sale Agreement.
Share Sale Agreement
If you are buying or selling shares in a company, you will need a detailed share sale agreement that clearly sets out the terms of the share sale. A well drafted share sale agreement will address the following items:
- the number of shares being purchased or sold;
- the purchase price for the shares;
- when and where completion of the sale will take place;
- how payment will be made, for example, a one-off payment at completion or instalments to be paid over time; and
- a full set of warranties to be provided by the vendor of the shares.
If the company has a shareholders agreement, the shareholders agreement should set out what rights each shareholder has. This may include the right of first refusal, which means that shares cannot be transferred to a third party, unless the same shares have first been offered (usually pro-rata) to the existing shareholders. If the shareholders agreement provides the shareholders with a right of first refusal, then, normally, the shareholders are required to agree in writing, or pass a special/unanimous resolution, to agree to the transfer of shares to a third party and waive their right of first refusal in this instance.
The share sale agreement usually consists of three parties:
- the seller;
- the buyer; and
- the company in which the shares are being sold/purchased.
Depending on the company’s shareholders agreement and/or constitution, the board of directors may be required to convene for a board meeting and pass a resolution at the meeting, for the company to enter into the agreement.
Share Transfer Form
At completion, the seller of the shares must handover to the buyer a signed share transfer form setting out the shares being transferred and the consideration received.
After completion, the company is required to cancel the seller’s existing share certificate and issue new share certificates according to the new shareholdings.
Letter of Resignation
If the seller is resigning as a director of the company upon completion of the share sale, the seller should handover a signed letter of resignation prior to or on completion.
Notification to ASIC
Once a share sale has been effected, the company is required to notify ASIC within 28 days of the change. This can be done by completing a Form 484, which is available on the ASIC website.
Each document is imperative in ensuring that a share transfer has been carried out properly. Problems can arise in the future if share ownership is not properly transferred from one party to another. If you are looking to purchase or sell shares in your own company, speak to an experienced commercial lawyer from LegalVision. Simply call us on 1300 544 755 and our Client Care team will be able to assist!
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