Share Purchase Agreement
SHARE PURCHASE AGREEMENT
A share purchase agreement is a formal contract signed between a buyer and seller with respect to purchase of shares. The agreement can be either between a single buyer and seller or between a seller and multiple buyers. In the latter case, if the buyers are shell companies or companies created only for the purpose of effecting an SPA and lacking financial or administrative credibility, it should be ensured that Principals of such companies, i.e. heads of such companies are made Covenants/Guarantors to ensure payment or compensation in cases of fraud or non-payment. Thus, such an agreement helps in formalizing and executing sale of shares in an organized and legal manner.
FEATURES OF MEMORANDUM OF UNDERSTANDING
1. Track of shareholder: The biggest advantage of share purchase agreement is that it helps the companies to keep a track of shareholders and include them in decision making process. It also helps in keeping a creating a legal framework to protect the rights of seller.
2. Arbitration clause: Share purchase agreement also include clause of arbitration which will help you in case of dispute arises between the buyer and seller. Also agreement provides closing mechanism.