Finally, and as an example, we insert below two models of clauses, which are generally contained in the contract to buy and sell shares in the form of declarations and guarantees, because they are generally of great importance: defined terms are used to simplify a document and specify certain words, for example what is under “intellectual property rights” or “confidential information”. The definition of the terms in the document helps to avoid future quarrels over what they mean. “Interpretations” are important because they clearly show how certain formulations should be interpreted in law. This is primarily a repetition of the representation and guarantee clause, but it is included in the share purchase agreement to protect the interests of the parties. Some of these guarantees will disappear at closing, while others, such as the law and the holding of shares, will continue well beyond the conclusion. For most transactions, confidential information is disclosed by both parties, so it is common practice for the share purchase agreement to include confidentiality provisions that address these matters. This is often the shortest and simplest layout in the SPA. However, it is one of the most important because it ensures that full legal ownership of the shares (also known as “title”) is duly transferred, as well as all relevant rights attached to the shares (for example. B dividend rights). As a general rule, this provision also stipulates that the shares are free of any charge, which gives the buyer the consolation that the seller has not mortgaged any of the shares to a bank or other lender. In principle, share transfers to UK limited companies will generally involve a two-step process. First, the buyer and seller enter into a sales contract, often called a share purchase agreement, when they agree on the price for which the shares are sold and the other terms of sale.
When someone sells their shares in a business, they often hope for a clean break. However, as some of the company`s liabilities – particularly the tax – are not disclosed until after the transaction, buyers must ensure that outgoing owners remain on the hook, and this is one of the main objectives of the main sales document, the share purchase contract. This is important because it is a written agreement that is binding and reduces misunderstandings between the parties.