Share Sale Agreements: 6 Key Points
What is it?
As the name suggests, a share sale agreement is a contract whereby one party agrees to purchase shares in a company from the other party.
Application for small business people
If small business people wish to acquire a new business, then one way of accomplishing this is by purchasing all of the shares in another company. Acquiring a new business in this way can, in certain circumstances, be simpler and less disruptive to the company than entering into a business sale agreement.
Transferring the ownership of shares effectively means that the purchaser simply becomes the new owner of everything owner by the company. The assets and liabilities of the company itself don’t need to be transferred separately as they are owned by the company itself.
In entering a share sale agreement, the purchaser is agreeing to take on all of the pre-existing rights and obligations of the company. Purchasers need to be very careful to undertake a thorough due diligence to ensure that they are fully aware of any current and future liabilities of the company. The purchaser will often request a warranty from the seller that there are no undisclosed liabilities.
An advantage of transferring ownership of a business in this way is that the contracts in the company’s name can usually continue without impact. Relationships with customers, suppliers and employees need not be disrupted.
6 key things to consider
When entering into a share sale agreement, it is important to carefully consider the following six key factors:
- Is the agreement for all of the shares in the company, or only a portion?
- What is the market value of the shares?
- Is the purchaser aware of all of contracts that the company is a party to?
- Do any of the contracts held by the company require the consent of the other party before a share sale can take place?
- What are the tax and stamp duty consequences of the share sale for each party?
- Does the share transfer need to be registered with the Australian Securities and Investments Commission?
Want my view on your own situation?
Book an initial consultation: up to two hours with me by phone for a fixed fee of $1,650 (including GST), then a short written note of my advice and next steps. If my conflict check means I can't act, I'll refund your fee in full. To check anything first, email
info@klaw.com.auor call
(07) 3103 3199.
Joe Kafrouni, Accredited Specialist in Business Law, Kafrouni Law
Disclaimer: This article is general information only and is not legal advice. Before acting on it, get advice on your own circumstances. To the extent the law allows, Kafrouni Law accepts no liability for any loss arising from reliance on it. This article is the copyright of Kafrouni Law.
What People Say
Book an initial consultation
An initial consultation is the best way for us to find out whether, and how, I can help. It suits business owners and directors facing a decision that matters. You get my considered view of your situation, not just a first impression.
The fee is a fixed $1,650 (including GST). It covers a phone consultation of up to two hours, plus up to one hour of my time to consider the material you send me beforehand and to prepare my written note afterwards. Here is how it works:
1. When you book, you tell me briefly what the matter is about and who else is involved, so I can carry out a conflict check and confirm I’m free to act. If I can’t act for you, I’ll refund your fee in full.
2. I tell you what information and documents I’d like to see, and I consider them before we speak.
3. We talk it through by phone. I give you my initial advice, the options I see and what I’d do in your shoes.
4. Afterwards, I send you a short written note of my advice and the next steps I recommend.
If I can help further, I’ll explain how. If I can’t, I’ll say so. You are under no obligation to engage me further. If your matter needs more than this, I’ll send you a proposal setting out how I can help and an estimate of my fees. No further work starts until you accept it.
I keep only a limited number of consultation times. If none suits you, or you’d like to check anything before booking, email info@klaw.com.au and I’ll do my best to accommodate you.