Share Sale Agreement Lawyers
Share sale agreements are pivotal in transferring ownership and restructuring the equity of a company.
Whether you're a business owner planning to sell shares, a shareholder looking to divest your equity, or an investor purchasing shares in a company, a well-drafted share sale agreement makes sure that all parties' rights and responsibilities are clearly defined and protected.
These agreements are essential for outlining the terms of the sale, including price, payment terms, representations and warranties, and any conditions precedent to the sale.
At Lawhive, our network of corporate lawyers is on hand to provide expert legal services for share sale agreements, guiding you through every stage of the share transaction, ensuring that your interests are safeguarded and the process is carried out smoothly.
With a deep understanding of corporate law and extensive experience in handling share sales, our network of lawyers are committed to delivering tailored solutions that meet your specific needs, whether you are selling or buying.
Contact us today for a free case evaluation to find out more and get a fixed-fee quote for the services of a specialist lawyer to draft, review, or support your share sale agreement.
What is a share sale agreement?
A share sale agreement is a legally binding contract that outlines the terms and conditions under which shares in a company are sole and transferred from one party to another.
What is included in a share sale agreement?
The key elements of a share sale agreement include:
Identification of the seller(s) and buyer(s) of the shares;
The number and class of shares being sold;
The agreed price for the shares and how it will be paid (e.g. lump sum or installments);
Warranties and representations made by the seller about the state of the company and its shares, which the buyer relies on when making the purchase;
Conditions that must be met before the sale can be completed;
Details on how and when the transaction will be finalised;
Ongoing responsibilities of the parties.
When is a share sale agreement used?
Share sale agreements are typically used:
When a business owner sells all or part of their company;
When investors purchase shares in a company;
During mergers, acquisitions, or when restructuring the ownership of a company.
Why do I need a share sale agreement?
Share sale agreements provide legal protections to both the buyer and the seller.
Crucially, these types of agreements include warranties and representations that protect the buyer if any issues arise after the sale.
A share sale agreement also defines who is responsible for any liabilities that may arise before or after the sale, protecting against unforeseen claims.
How do I determine the value of my shares before selling?
Determining the value of share before selling involves a combination of financial analysis and market research.
A professional valuation expert or financial advisor can provide an independent and objective assessment of the value of shares using advanced techniques and industry insights.
What legal approvals are required to sell shares in a company?
Board approval
For many companies, especially private limited companies, the sale of shares requires the approval of the board of directors who must pass a resolution authorising the sale of the shares.
Shareholder approval
Shareholder approval may also be necessary, particularly for significant share transactions or if specified in the company's articles of association. This involves a special resolution, which typically requires a 75% majority.
Existing shareholders might have pre-emotion rights also, giving them the first opportunity to buy shares before they are offered to external buyers.
Shareholders' agreement
If there is a shareholders' agreement in place, it will typically contain clauses that affect the sale of shares. For example, the agreement might require consent from certain shareholders or impose specific conditions on the sale.
Further, tag-along and drag-along rights that protect minority shareholders in the event of a sale may come into play.
Regulatory approvals
Companies in regulated industries, such as financial services, may need approval from bodies like the Financial Conduct Authority.
Due diligence
Buyers will typically conduct due diligence to assess the value and risks associated with purchasing shares.
Sellers should be prepared to provide all necessary information and documents.
Tax clearance
In some cases, getting tax clearance from HMRC may be advisable to make sure that there are no outstanding tax liabilities that could affect the sale.
The legal transfer of shares is completed using a stock transfer form which must be signed by the seller and sometimes the buyer.
Further to this, if the sale involves consideration over £1,000, stamp duty must be paid.
The company must also update its register of members to reflect the new ownership once the transfer is complete.
Public disclosure
For public companies, certain disclosures must be made to the market and regulatory bodies.
For example, it may be necessary to announce the share sale through the London Stock Exchange.
As you can see, selling shares in a company involves lots of different moving parts.
At Lawhive, our network of experienced corporate lawyers is on hand to guide you through the entire process, including drafting the share sale agreement.
Contact us today to discuss your share sale and get a fixed-fee quote for the quick assistance of a specialist lawyer.
How do pre-emption rights affect the sale of shares?
Pre-emption rights, designed to protect existing shareholders from dilution of their ownership stakes, can potentially:
Delay the sale process as shares must be offered to existing shareholders first;
Impact the selling price if existing shareholders believe the price is too high;
Make the shares less attractive to external buyers.
In some cases, existing shareholders may agree to waive their pre-exemption rights, allowing shares to be sold directly to an external buyer. Alternatively, exceptions to pre-emption rights may apply, allowing shares to be sold without offering them to existing shareholders first.
How do I handle representations and warranties in a share sale agreement?
Representations and warranties provide assurances from the seller to the buyer regarding various aspects of the company and its shares.
They typically cover a wide range of areas, including:
Confirmation that the seller has clear title to the shares being sold and that the shares are free from encumbrances;
Assurance that the company’s financial statements are accurate, complete, and prepared following applicable accounting standards;
Confirmation that the company complies with all relevant laws and regulations;
Disclosure of all material contracts and confirmation that the company is not in breach of any significant agreements;
Assurance that no ongoing or pending litigation against the company could have a material adverse effect;
Confirmation that the company has met all its tax obligations and there are no outstanding tax liabilities.
Tailoring these clauses to the specifics of the transaction, negotiating fair terms, and using disclosure schedules can help manage potential risks and liabilities.
At Lawhive, our experienced solicitors can assist you in drafting, reviewing, and negotiating representations and warranties to ensure a smooth and secure share sale transaction.
Contact us today to discuss your needs and learn how we can support you in your share sale agreement.
What is the process for transferring shares once the agreement is signed?
A stock transfer form must be completed to document the transfer of shares. This form includes details about the seller, the buyer, and the shares being transferred.
This form must be signed by the seller and, in some cases, the buyer to acknowledge receipt of the shares.
Pay stamp duty
If the consideration for the share transfer exceeds £1,000, stamp duty is payable at a rate of 0.5% of the purchase price. The completed stock transfer form must be sent to HMRC for stamping.
Update the Company's Register of Members
Once the stock transfer form is stamped (if applicable), it should be submitted to the company’s secretary or the person responsible for maintaining the company’s records.
e company must update its register of members to reflect the new ownership. The name of the transferee will be added, and the transferor’s name will be removed.
A new share certificate should also be issued to the transferee, and the old certificate held by the transferor cancelled.
Notify Companies House (if applicable)
Private companies don't generally have to notify Companies House of share transfers unless there has been a significant change in ownership or changes have been made to the company's articles of association.
What are conditions precedent, and why are they important in share sale agreements?
Conditions precedent are specific requirements or actions that must be fulfilled before a share sale agreement becomes fully effective and the transaction can be completed.
Types of conditions precedent include:
Regulatory approvals
Third-party consents
Due diligence
Shareholder approvals
Material Adverse Change clause
Financial covenants
Legal opinions.
At Lawhive, our experienced solicitors can assist you in drafting and negotiating share sale agreements, including the careful formulation of conditions precedent to protect your interests.
Contact us today to discuss your needs and learn how we can support you in your share sale transactions.
What are indemnities, and how do they protect me in a share sale agreement?
In the context of a share sale agreement, indemnities are used to provide financial protection against particular risks and liabilities that may arise after the transaction is completed.
Common types of indemnities in share sale agreements include:
Tax Indemnity: Protects the buyer against any unforeseen tax liabilities that arise from events occurring before the sale;
Environmental Indemnity: Covers potential environmental liabilities, such as contamination or regulatory breaches that existed before the sale;
Litigation Indemnity: Compensates the buyer for costs related to ongoing or future litigation that stems from actions or events before the sale;
Employee Indemnity: Protects against claims related to employee matters, such as unpaid wages, wrongful termination, or pension liabilities that existed before the sale;
Warranty Breach Indemnity: Provides compensation if any warranties given by the seller in the agreement turn out to be untrue or misleading.
Indemnities offer targeted financial protection against specific risks and liabilities identified during due diligence or negotiations.
If the indemnified event occurs, the indemnity allows the affected party to recover the costs and losses directly from the indemnifier.
How does an earn-out structure work in a share sale agreement?
An earn-out structure in a share sale agreement is a financial arrangement where a portion of the purchase price (contingent payments) is contingent on the future performance of the company being sold.
Contingent payments are typically based on performance metrics, like revenue targets or operational milestones.
Earn-out structures typically range from 1 to 5 years.
What is the role of a solicitor in a share sale agreement?
Throughout a share sale agreement, a corporate lawyer can:
Assess the feasibility of the share sale and advise on the most appropriate structure for the transaction;
Perform thorough due diligence on the target company, including financial, legal, operational, and regulatory aspects;
Identify potential risks and liabilities that could affect the transaction and advise on how to mitigate these risks;
Draft the share sale agreement, ensuring that all essential terms and conditions are clearly defined;
Assist in negotiating the terms of the share sale agreement;
Make amendments to the agreement based on negotiations;
Advise on and help fulfill any conditions precedent outlined in the share sale agreement;
Prepare and review all documents required for completion;
Advise on any ongoing obligations or covenants included in the share sale agreement, such as non-compete clauses or confidentiality agreements;
Assist in resolving any disputes that arise post-completion.
At Lawhive, our experienced solicitors are dedicated to guiding you through every step of your share sale, ensuring that your interests are protected and the transaction is completed smoothly.
Contact us today to discuss how we can assist you with your share sale agreement.
Do I need a solicitor for a share sale agreement?
There is no legal requirement to have a solicitor for a share sale agreement.
That being said, the complexities and potential risks involved make professional legal assistance highly advisable.
Your solicitor can provide advice and support throughout the transaction, most importantly making sure your interests are protected and the process is completed smoothly and in compliance with the law.
How long does a share sale agreement typically take?
The share sale process can take anywhere between 3 to 6 months from initial discussions to completion.
Below is a breakdown of the kind of timelines you might expect, however, these are just estimates.
Stage | Estimated Timeline |
|---|
Preparation and initial discussions | 2-4 weeks |
Due diligence | 4-8 weeks |
Negotiation and drafting of the share sale agreement | 2-6 weeks |
Regulatory approvals and third-party consents | 4-12 weeks |
Finalising conditions precedent | 2-6 weeks |
Completion and closing | 1-2 weeks |
Post-completion activities | 1-4 weeks |
Timelines can, of course, vary based on the specifics of the transaction.
More complex share sale agreements, like those involving multiple parties or significant regulatory hurdles, can take longer to complete.
Other factors that can affect the timeline include the depth and thoroughness of due diligence required and protracted negotiations over terms.
If you're looking to speed the process up, engaging an experienced corporate solicitor can streamline the process and help you move forward with confidence.
Why choose Lawhive for your share sale agreement?
In-depth expertise: Our network of solicitors have extensive knowledge and experience in corporate law, particularly in drafting and negotiating share sale agreements;
Affordable support: Our transparent fixed fees make it easy to get expert legal help regarding a share sale agreement;
Client-centric approach: We put you first, offering personalised advice, second-to-none support, and strategies to achieve the best possible outcome for your share transaction.
If you are involved in a share sale transaction, don't leave anything to chance.
Contact us today for expert legal assistance with your share sale agreements. Our network of corporate lawyers is ready to provide the guidance and support you need to ensure your transaction is successful and your interests are protected.