A share sale agreement involves the sale of minor or major equity in a company. It is a legally binding contract that outlines the conditions of the sale of shares between the vendor and the purchaser.
Share sale agreements have a number of elements that identify the terms and conditions of selling shares. At a minimum, they list the vendor, purchaser and guarantor, purchasing price, the number of shares sold, when the shares come into force, options for additional shares and additional commitments.
Share sale agreements can include clauses that protect the purchaser in a breach of contract. A company and a shareholder are separate entities, so any liabilities such as hidden taxes or debts belong solely to the company. The purchaser has no responsibility to help the company overcome such liabilities.
Sometimes a vendor will have a previous agreement to sell shares to a third party. If a purchaser buys shares from a seller and then the other party chooses to exercise his option to buy, the purchaser may have to sell his shares to the third party, even if he has a share sale agreement.
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