About this document:
This document enables a sale or purchase of a minority or majority stake in a company. It is suitable for high value transactions and any type of enterprise. Note that the type of business is generally of little importance, for example you can use this template to buy into a coffee plantation or an accountancy firm.
Sale / purchase of all shares in a company ZA-CP201 to ZA-CP207 provide templates for different scenarios.
Agreements for sale of a business, where you are selling or buying not shares in a company but just the business as a going concern.
A note on warranties
Warranties protect the buyer, ensuring that what the seller says is not marketing fluff, but the absolute truth as he believes it.
It is common practise and very reasonable for a buyer to demand warranties and for a seller to provide them. It is also quite easy for a buyer to use warranties to “improve” his original deal, so they can be a good negotiation tool.
Sellers: do not give a warranty if you do not know whether it is true, but do be prepared to “go and find out” information that could be within your knowledge. Simply, use them to your advantage and negotiate on which to include.
You are probably asking yourself “Do I need 140 warranties?” “Will I understand them?” We say absolutely yes and absolutely yes! Our warranties are written in plain English with no legalese or other jargon – they are simple and effective. A seller should start with a full set unless he is sure he knows everything there is to know about his proposed acquisition, or the value is very small, or the company is not trading.
Who will use this document?
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Any individual or company selling or buying a stake in a company. It is most common for the buyer to produce the sale document. However, producing the document yourself, whichever side you are on, gives you the advantage of being able to amend it in your favour.
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This agreement allows a buyer to decide how tough he wants to be and who he wants to bind. As drawn, the document binds all the shareholders, not just those selling, but politics may require warranties to be given only by those departing.
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A seller of shares wanting tips and hints as to what is fair and reasonable in a document comparable to the one now presented to him by the buyer or his solicitors.
Why such a long document?
Net Lawman has set out to protect the buyer or seller, not to make decisions about what you do or do not need in your contract. Every situation is unique. Simply choose what you need in your agreement and delete what does not apply.
This document assumes a buyer is buying perhaps 20% to 60% of the shares. He may also be arranging a loan facility or otherwise supporting the company (these other arrangements are not covered in this document, but Net Lawman can supply a loan document, shareholders’ agreement and directors’ service contracts). It is assumed that the Buyer wants the same level of protection as he would expect if he was buying the whole company. In this agreement, the warranties are given not only by the sellers of shares but also by those “staying in”.
Key features
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appropriate for any type of trade or business;
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extensive use of warranties encourages full disclosure by the sellers and the ongoing shareholders;
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drawn for the deal to be completed on the same day, not at some future time;
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suits a single company of any size;
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suitable provisions for contract to cover leasehold, freehold and tenanted property;
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up to 150 individual warranties where required;
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retention up to one year against reduction in forecast profit and warranty claims;
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provision for some sellers to be trustees and not therefore bound by the warranties
This document includes provision for:
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Agreement for sale
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Purchase price and how made up
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New shares to be issued to buyer
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Calculation of minimum profit
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Completion of the deal and delivery of documents
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Warranties applicability
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The Warranties
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Trustees limited Warranties
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Restrictive agreement to prevent Sellers from competing afresh
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Sellers protection provisions
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Various legal provisions usual in a document of this type
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Existing shareholdings
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Details of the company
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The warranties
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Particulars of the properties
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Superannuation arrangements
There are up to 140 individual warranties relating to:
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General
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Effect of this agreement
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Group structure and operation
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Accounts
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Cash flow
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Taxation
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Bank and borrowing
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Assets
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Trading and contracts
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Business matters
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Litigation and regulation
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Properties - freehold, leasehold and let
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Employment
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Pensions
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Insurance
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Intellectual property
- Internet and domain names
