Share Purchase Agreement Guide

A seller will generally try to limit the extent of its liability for warranties. The general principle is that a breach of a warranty obliges a seller to compensate the buyer for the damage suffered directly. This would generally be measured by a loss in the value of the stake. Conditions precedent are prerequisites for sale. They must normally be fulfilled before the purchase obligation arises. There will usually be a limited period during which the conditions must be met. Most of the problems found during due diligence can be mitigated or compensated through the share purchase agreement. However, they must be disclosed in due diligence, identified by the buyer and treated appropriately in the SPA. This article discusses the general concepts and variations of an SPA, but is by no means exhaustive.


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