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Learn more about Share Purchase Agreement in Philippines

A share purchase agreement (SPA) is often entered into by and between a buyer and seller of a target company’s shares, in which the seller agrees to sell a certain number of shares to the buyer for a certain price. The SPA serves to document mutual written agreement on the terms and circumstances of the sale of some or all of a target company’s shares. Assume that a target firm includes its subsidiaries in this article. SPAs are commonly used in mergers and acquisitions (M&A) when an investor purchases a company whole or substantially. This article defines the major words involved in the private acquisition of a target company’s shares. You can also download our professional Shareholders Agreement in an easy to edit Word format for your needs.

Table of contents

What is a Share Purchase Agreement?

A share purchase agreement is a contract for the purchase and sale of stock. This agreement describes the terms and conditions under which a company’s shares are sold and acquired. A share purchase agreement’s goal is to simplify the transfer of a company’s shares from a seller to a purchaser.

A Share Purchase Agreement is an agreement between a seller and a buyer to obtain business shares. The terms and conditions of the agreement are specified and mutually agreed upon by both parties (a seller and a purchaser). The seller promises to sell the buyer a specific number of shares at a specified price. The procedure for transferring the share will begin after both parties have signed the share purchase agreement. The parameters agreed upon by two parties, as well as the total number of shares to be sold, are included in a share purchase agreement.

Why use a Share purchase Agreement?

1. Overcome a Late Payment

A Share Purchase Agreement is a form of head business that employs a speculator. Regardless of whether numerous firms are developing a strategy to cope with such challenges, a lack of understanding may damage company operations.

2. Both Parties' Protection

A Share Purchase Agreement allows both the seller and the buyer to preserve and defend their interests prior to the process of transferring shares. This agreement covers all facets of the stock exchange, ensuring that all parties comprehend each paragraph and its purpose.

3. The Share Purchase Agreement's Purpose

The objective of the share sale and purchase agreement is a procedure that occurs between two parties, the vendor and the buyer. The shareholder agreement specifies the shareholder’s duties, rights, and other changed requirements. It is difficult to maintain consistency between the two parties if the document is missing. The Share share purchase agreement form safeguards the rights of both parties.

What is included in the Share purchase Contract?

A Share Purchase Agreement includes information on the firm, the shares being transferred, the seller and purchaser of shares, the applicable law, the kind of shares being sold, and the number and price of shares sold. This agreement also includes payment details, such as if a deposit is necessary, when the entire payment is due, and the closing date of the agreement, among other things.

Shares are frequently classified into two types: classes and shares. The two most important are voting and not voting. Shareholders with voting shares can voice their opinions on board of director decisions and corporate policy. Changes to the board of directors or business policy cannot be voted on by non-voting shareholders. The kind of shares must be precisely specified in the Share Purchase Agreement so that there is no misunderstanding or disagreement between the parties.

It is advisable to hire a qualified company lawyer in India to prepare a share purchase agreement so that there are no surprises. A Share Purchase Agreement in India must, in general, have the following provisions:

➤ Information regarding the buyer and seller, i.e. the shareholder and the corporation
➤ The liabilities and responsibilities of both parties
➤ Permissions, authorizations, and so on must be obtained prior to the shareholder's transfer or sale of shares
➤ Information on the price at which the business sells its shares
➤ Disagreement resolution and arbitration processes in the case of a legal dispute
➤ In the case of a legal dispute, court jurisdiction and applicable laws

What is the purpose of provisions in a contract?

Miscellaneous clauses are an important part of every well-written agreement. Many people pass over these phrases and dismiss them as normal boilerplate, yet they are crucial. It is a repository for phrases that attorneys could overlook.

Most contracts, including SPAs, include various clauses. They often include provisions addressing, among other things:

Is Stock Purchase Agreement enforceable?

An agreement must fulfill particular legal conditions, such as an offer and acceptance of that offer, in order to be legally binding. In order to protect his interests, the investor will enter into a contract with the company, in this case a share purchase agreement. Share purchase agreements, like any other legally enforceable contract, will include information such as the parties’ names, consideration, guarantees and indemnities, needed precedents, and so on. Because this agreement covers all aspects of the share transfer, it will help the parties resolve any future issues.

➤ Notices to the parties and how they should be delivered;
➤ Severability and correction of unlawful or unenforceable provisions;
➤ Survival of some clauses after the SPA's expiry or cancellation;
➤ Merger and integration in which the SPA becomes the definitive written embodiment of the parties' intentions and commitments and disregards or overrides any earlier agreements or understandings unless expressly included or referenced in the SPA;
➤ If and how the SPA can be modified;
➤ governing legislation and jurisdiction;
➤ Method of resolving disputes;
➤ Additional pledges to do everything is required to carry out the conditions of the SPA or supplementary agreements;

What are the rules of confidentiality and non-disclosure?

An SPA will often include language stating that the provisions of the SPA, including its existence, are considered secret information and should not be divulged to any third party. This language, however, should incorporate and specifically refer to any prior non-disclosure agreement (NDA) that was (or should have been) entered into between the purchaser and seller during a previous phase of the transaction, such as the term sheet or DD phase, and emphasize that any such agreement remains in full force and effect until it terminates or is superseded. Any NDA wording in the SPA can reflect additions to earlier NDAs, integrate the language of the prior NDA by reference into the SPA, and completely replace such prior NDAs.

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