Share Purchase Agreement: How do you draft them? A share purchase agreement entails the following: The number of shares a shareholder holds represents how much ownership it has in the company. The shares represent ownership units. Buyers and sellers are both parties to this agreement. A buyer wants to sell its company shares to a buyer. An agreement for the purchase of shares would specify the number and price of the shares. It is imperative that the buyer does some due diligence in order to match the terms of the letter of intent and the share purchase agreement before signing the share purchase agreement. The share purchase agreement contains the following elements: ● Name of the company ● Name of the purchaser ● Based on the value of shares ● Representations and warranties ● Sold shares ● An agreement of indemnification ● Location of transaction Use of a share purchase agreement: When an individual or organization wishes to purchase or sell shares in a company, a share purchase agreement will be used. Share types include: Shares can be either voting or non-voting. Shareholders with voting rights have an opinion on the board of directors' decisions as well as a voice in policy making, whereas shareholders with non-voting rights do not have the right to vote. Reasons for using a share purchase agreement: ● This is a legally binding document. ● There is a greater chance of increasing revenue through business. ● Before the signature is done, the seller and purchaser can make the final decision. ● Benefits from taxation. The importance of share purchase agreements: It is a written agreement that reduces misunderstandings between parties and is legally binding. In this agreement, the seller's ownership can be proved, and the purchaser is given the confidence to believe the seller's claim. It provides all the information about the transfer of shares. An agreement for dispute resolution is prefixed, along with the seller's warranties. Share purchase agreements should include the following clauses: Here are some classic clauses: ● The parties to the agreement are one of the most important factors in any contract. The parties to a share purchase agreement are the seller and the purchaser. ● The recitals should clearly state the facts and objectives of the transaction and the roles of each party. ● Definitions and interpretations - the definitions of the words and phrases in the agreement must align with what they mean with the agreement's use, and clauses should be interpreted similarly to their definitions. It is ideal for a definition to limit itself to the meaning of the term. ● Purchaser’s representations and warranties – this clause is usually repeated to protect the parties' interests. ● Indemnification – describes the amount, procedure, time limit, and subject matter of the claim. ● Notice – the notice must contain the location where it will be dispatched, the form, such as electronic or other, and the acceptance format. ● Arbitration - The Supreme Court ruled that both parties can have seats in India if both parties are Indians and if one party is an outsider, they may have a seat outside India. Arbitration is not well known in India but as the supreme court ruled, both parties can have seats in India if both parties are Indians. The arbitration clause should specify the procedural law, the language of arbitration, and the number of arbitrators. ● Termination – the termination clause should clearly state how the agreement can be terminated.