Are you a shareholder of a company? Are you looking to sell your shares? If you answered yes to both questions, read on! This article will explore the types of warranties that should appear in a Share Sale Agreement from a vendor’s perspective. In other words, what warranties will be made by the purchaser to the vendor of the business.
If the purchaser has drafted a share sale agreement for you to sign, amongst other things which need to be covered in a share sale agreement, there should be a detailed suite of warranties to be provided by the purchaser.
Types of Warranties
These warranties may include, but are not limited to, the following:
- the purchaser will be not be in breach of any existing obligations or agreement in completing this transaction;
- the purchaser has full power and capacity to perform all of its obligations under the share sale agreement;
- the purchaser agrees to enter into the company’s existing shareholder agreement (if the company has one available); and
- the purchaser is entering into this share sale agreement on its own account and not as a trustee for another person or entity.
If the purchaser is purchasing the shares as a company, you will want some additional warranties from the purchaser. This includes, for example:
- that it is validly incorporated in accordance with the applicable laws;
- that it has not gone into, or is proposed to go into, liquidation; and
- that there is no process for winding-up or dissolution which has been presented or threatened against it.
Similarly, if the purchaser is an individual, you will want a warranty that he or she is not bankrupt, and therefore able to make payment of the purchase price on completion.
As a vendor, you will generally be required to provide a much more detailed suite of warranties – especially if the purchaser is not part of the company already and has not had access to important company information. If you want to know what sort of warranties a purchaser will want from you, stay tuned for our article on Vendor Warranties.
For more information and legal assistance, call LegalVision on 1300 544 755 and get a fixed-fee quote for drafting or reviewing your Share Sale Agreement.