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Share Purchase Agreement for Buyer ("Share Deal")

Key points and template

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Key Points Included in This Share Purchase Agreement for Buyer

Details of the parties, including whether there are one or several sellers
Price for the purchased shares
Protections against the sellers stripping value out of the business (including through locked-box mechanism and conduct of business covenants)
Differentiated sets of warranties depending on whether the seller can influence the company’s business
Detailed confidentiality covenants
Consequences and remedies in case of contractual breach

Use a Share Purchase Agreement for Buyer if …

… you (for example as a funder, investor, or business angel) are acquiring a private company by purchasing its shares from its current owner(s)

…you (for example as a funder, investor, or business angel) are acquiring a significant stake in a private company

… you want to document the transaction and mitigate the legal risks associated with the company’s business

What is a Share Purchase Agreement for Buyer?

Under a share purchase agreement, one or several sellers agree to sell their shares in a company to a buyer.

The purchase of shares or “share deal” is the most common way to acquire private companies (or at least a substantial stake) in Switzerland.

Unlike asset deals – which traditionally require the identification and separate transfer of each asset and liability, the entire business is transferred along with the shares. This makes the acquisition of a (significant shareholding in a) company rather simple from a legal standpoint.

Compared with simplified bulk transfers of assets provided by law, the sale remains confidential.

The flip side, however, is that the buyer is not able to cherry-pick those assets that it wishes to acquire and leave liabilities with the seller. Consequently, the agreement must balance the allocation of risks between the seller and the buyer. The seller’s guarantees (so-called representations and warranties) regarding the business and the related remedies will thus very often represent the core of the legal negotiations; the buyer will seek protection against the – sometimes hidden – risks it is assuming by buying the shares, while the seller will try to minimize its liability as much as possible.

The agreed purchase price usually is based on a company’s valuation that derives from financial statements – which reflect a picture of the company in the past. This means that the buyer will economically assume losses incurred between the date of the financial statements and the transfer of the shares (closing of the transaction).

To mitigate the associated risks, distributions by the company to the seller or related parties will need to be thoroughly restricted.

Along the same lines, the way the company operates its business until the closing needs to be addressed in the agreement – insofar as, of course, the seller is able to influence business operations. The seller(s) may also sell only part of its/their shares and remain shareholders of the company. In this case, the buyer and the seller(s) often will enter into a shareholders’ agreement to govern their relationships as the company’s co-owners.