Company purchase agreement: cash and shares, part deferred

This is a comprehensive agreement for the sale of a single company for cash and equity (shares) in the acquirer. Additionally, there is optional provision for an additional amount to make up the whole purchase price if the warranted future profit is met.

Suitable for use in: England & Wales and Scotland
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About this document

This agreement is for all shares in the company to be purchased, where part payment is in cash and part payment is in the shares of the acquirer.

Optionally, there is provision for the final price to be increased if future profits exceed a short-term target.

The industry, the size and the number of shares to be bought are not important to the suitability of use of the document.

Usually, it would be the buyer who would draft the sale agreement, as he, she or it has the least information about the state of the business, and therefore the greater possible loss. However, this contract could be used by the seller, as an aide memoire for negotiations or to help create heads of terms.

The bulk of the document comprises the warranties. How these work and why they are so beneficial is explained in detail here. To summarise, the seller warrants that there is no undisclosed information that if known might reduce the value (for example, that there are no materially large contingent liabilities in supplier contracts). If the warranty turns out to be false, the buyer has recourse to seek damages.

We provide many warranties in the document. You can choose which are appropriate for your circumstances and delete those you do not need. We find that it is easier to provide a large list to be edited by deletion than a short list and expect the client to add more.

We also include an example disclosure letter to be used. It is unlikely to be perfect as is – we expect you to edit it. However, it will provide you with a format that shows how such a letter works, and a style you could use. Your words can be added easily.

This document complies with the Companies Act 2006 as amended.

Other similar templates

If your deal is for some, but not all shares, then a shares purchase contract should be used in place of this one.

If what is being bought are the assets of the business or a distinct stream, then a sale agreement should be used.

Use of a shareholders’ agreement

Since the deal is partly for the equity in the buyer’s company, the seller may be subject to provisions in any shareholders’ agreement as soon as the transaction is completed. The seller should therefore enter into a new shareholders’ agreement at the same time as the deal for the acquisition completes.

Features

  • Suitable for a single company of any size in any type of trade
  • Extensive use of warranties encourages full disclosure by the seller(s)
  • Suitable provisions for contract to cover leasehold, freehold and tenanted property
  • Restrictive agreement prevents sellers from competing afresh
  • Sellers protection provisions
  • Additional payment for "earn out" - profit in excess of target
  • Buyer’s acknowledgement of inspection of physical assets
  • Option for some sellers to be trustees and not therefore bound by the warranties

Contents

  • Agreement
  • Calculation of the purchase price
  • Buyer’s obligations
  • Buyer’s acknowledgment of inspection
  • Subscription of shares by the buyer
  • The retention and shortfall
  • Completion and delivery of documents
  • Warranties’ applicability and limitation
  • Warranties by sellers
  • Trustee warranties
  • Restrictive agreement
  • Sellers’ protection
  • The guarantee
  • Publicity and announcements

There are 115 individual warranties in sections relating to:

  • General
  • Company structure and operation
  • Accounts
  • Cash flow
  • Taxation
  • Guarantees and borrowing
  • Assets
  • Trading and contracts
  • Exceptional regulations
  • Properties owned and rented
  • Employment
  • Pensions
  • Insurance
  • Intellectual property
  • Information technology
Draftsman

This document was written by a solicitor for Net Lawman. It complies with current English law.

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