Indeed, Florida is a thriving environment for companies. Accordingly, buying and selling corporates shares is commonplace among the many profitable activities of prominent corporations established in the state.
In this article, you will discover how to negotiate a share purchase agreement in Florida.
The Making of a Share Purchase Agreement – An Overview
A share purchase agreement is a legal agreement that contains all terms and conditions regarding the sale and purchase of shares in a company. In layman’s terms, the primary function of this contract is to say that someone is either purchasing or selling shares in a corporation.
As the agreement provides, ownership will pass to the buyer once the shares in a specific corporation transfer.
Depending on the number of shares bought and other conditions in the contract, the buyer will likely have the right to appoint new directors, auditors, and other executives in the corporation.
The Making of a Share Purchase Agreement – Essential Terms
Specific provisions may alter the whole outcome of a share purchase deal, which means an in-depth assessment of the terms and conditions in the share purchase agreement is mandatory.
Dealing with the complexity involved in a share purchase agreement requires an expert approach, especially when it comes to ensuring the essential terms of the deal are set out in the agreement. Hence, the guidance of an expert business attorney in Florida is imperative.
Regardless of the segment of the corporation involved in the deal, every share purchase agreement has standard terms that represent the essence of the contract. This way, all share purchase agreements must detail:
- What shares are the buyer acquiring in the transaction?
- What is the number of shares involved in the transaction?
- What percentage of the company does this number equate to?
- How many shares in the company are outstanding?
- What categories of shares does the company have?
- Do the purchased shares come with voting rights?
Once all these terms have been set out in the contract, it is crucial to pay attention to the price/payment aspect. In detail, the agreement must provide:
- How much is the buyer paying in the transaction?
- What is the price per share?
- What is the total price the buyer has to pay on the closing date?
Share Purchase Agreement – Understanding Reps and Warranties
The term “reps and warranties” is used to describe the assertions made by both parties involved (buyer/seller) in the transaction.
Accordingly, both parties rely on each other to provide a complete landscape of all information and supporting documents needed to close the transaction.
The reps and warranties are not to be confused with the recitals or recital section, which is the early part of the contract that is not essential and unenforceable.
The language used in this part of the contract must be clear, including a statement that the seller has the authority to enter the transaction. Also, representations should state that the company is not a party to a lawsuit and is also not expected to be sued by any third party.
Share Purchase Agreement – Paying Attention to the Details
Before signing a share purchase agreement, buyers need to know that the corporation involved in the transaction is in good standing (e.g., not in debt with the government) and following its internal guidelines as required by law.
Besides working with an expert attorney during the negotiation, it is essential to request a copy of the company’s articles of corporation, bylaws, and shareholder agreement(s) to:
- Ensure that all documents presented by the company are valid and consistent
- Double-check if the share purchase agreement is consistent with the company’s internal documentation
In the US, the buying and selling of equity in a corporation is a security regulated by the SEC, which means it is necessary to have an SEC compliance statement. A valid statement could be a letter from an expert attorney stating the transaction is fully compliant with SEC rules.
It is also crucial to issue a stock certificate, which the buyer must exchange and execute. Plus, the document must have a transfer signature from the authorized signatory in the company – typically an executive, secretary, or president.
Finally, the agreement must provide whom the shares have previously belonged to and record the transaction to transfer the shares to their new owner – the buyer.
Share Purchase Agreement in Florida – We Can Help You
The process of buying/selling shares in a corporation has plenty of complexity involved. In this context, the guidance of an expert attorney is crucial.