Share Sale and Purchase Agreement

A Share Sale and Purchase Agreement is an agreement for the sale and purchase of a stated number of shares at an agreed price. The shareholder selling their shares is the seller and the party buying the shares is the buyer. This agreement details the terms and conditions of the sale and purchase of the shares.

Shares are fixed identifiable units of capital that represents a member's stake in a company. Once a person holds shares in a company such party becomes a member of the company with the right to transfer and transmit the shares.

A shareholder can either sell part or the entirety of its shares. If the shareholder sells its entire shares, it completely divests its interest in the shares in the company and ceases to be a shareholder of the company. In the same vein, if a party sells only a part of their shares, they divest their interest in the number of shares they sold to the buyer.

What distinguishes this document from a Share Subscription Agreement is that a share subscription agreement is used in cases where a company is selling its shares, while in a share sale and purchase agreement, a shareholder of the company is selling already issued shares to another party.

The document requires vital information, such as the parties to the transaction, description of the shares, the purchase price (consideration), warranties and representations of the parties, pre-completion, and post-completion requirements.

• The parties: The parties to this agreement are the seller, the buyer, and the company (whose shares are being sold). Note that the seller or buyer can either be an individual, company, or any other organization because companies and organizations can own shares in a company.

• The shares: In this document, the form filler will be required to set out the type and the number of shares to be sold to the transferee(s).

• The consideration: This is the total price of all the shares sold under the agreement. In this agreement, the form filler will include the purchase price, the method of payment, and other payment terms, such as:
• whether the buyer(s) will be required to pay a deposit;
• whether the buyer will pay in installments or by a single lump sum;
• the mode of payment;
• the date of payment.

• Completion: This occurs when the buyer(s) is granted title and ownership of the shares. It specifies the date and place of completion. It also includes the obligations of the parties after completion.

• Covenants and representations of the parties: This is the legal promise to do or refrain from doing certain acts. The document also contains the covenants of the seller and the buyer(s).

• Termination: This includes circumstances that can enable a party to terminate the contract and what happens in the event of termination.

How to use this document

This document is used when a party decides to sell part of or its entire shares to another. After completing this document, the parties should sign the document. If either of the parties is a company, the company may affix its common seal on the document and the document should be signed by either two directors of the company or one director and one secretary should sign the document on behalf of the seller.

Once all the parties have signed the document, each party should keep at least one original signed copy of the document for their record.

After a share sale and transfer, the company is required file the following document to the Corporate Affairs Commission to reflect the company's new share structure:

• form CAC2A (Return of Allotment);

• board resolution of the company (whose shares are being transferred) approving the transfer of shares;

• if the seller is a company, board resolution of the company approving the transfer of shares;

• if the buyer is a company, board resolution accepting the transfer of shares; and

• a share transfer form.

After the post-incorporation filing is done, the name of the buyer will be included in the company's register of members (if the buyer is not already a member of the company).

Applicable law

The Companies and Allied Matters Act, 2020 applies to this document. Also, the Investment and Securities Act and the Securities and Exchange Commission (SEC) Rules are applicable. The general rules of contract are also applicable.

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