Understanding Sale and Purchase Agreements & Share Purchase Agreements in ColoradoWhen sellers in Colorado execute a business sale and purchase agreements, there are certain key aspects that they must pay special attention to.

Each sales contract may have different nuances but attorneys for each side will want to conduct their due diligence and understand the primary concerns on the buyer or seller. Also, the same level of attention should be paid to share purchase agreements discussed below.

Contents of Sale and Purchase Agreements

Each sale and purchase agreement will generally have common sections in the document. The most common of the agreement contents will be:  seller representations and warranties; buyer representations and warranties; Description of the Transaction( at the beginning of the agreement); covenants for pre-closing; conditions of closing, survival and indemnification, termination provisions, and a section or general or miscellaneous provisions.

Signing and Closing: Sale and purchase agreements can have the signing and closing at the same time or the parties may sign the contracts first and close at a later time.

What are the main business terms? The is one of the most important aspects of a sale a and purchase agreement. Here, the contract will discuss the assets of business interests being sold. This varies depending on whether there is an asset purchase agreement or stock purchase sale.

As a seller, the details are important, the purchase and sale agreement should articulate what assets will not be transferred to the seller. This way, there is limited chances of miscommunication.

Excluded assets: Non-transferable assets may include 401K, personal vehicles, marketable securities etc.

Included assets: In a sale and purchase agreement, the parties general will transfer assets such as agreed-upon liabilities. This is yet another section that must be very specific. Buyer will generally take on company liabilities and accounts payable.

Buying/ purchase price:  An important part of the business purchase and sale agreement is the selling price and how funds will be presented.  There could be a promissory note along with a security agreement. All of the terms and conditions of payment should be expressly and clearly stated.

Share Purchase Agreements / Stock Purchase Agreements 

What is a Share Purchase Agreement? (SPA)

A Share Purchase Agreement is a sales contract used to transfer and assign ownership of existing shares in a business entity (shares of stock). The parties of a share purchase agreement are the seller and buyer.

Do I need a professional business evaluator?

When you execute a share purchase agreement, be mindful that if you are not buying shares from a publicly traded company, that the value of the shares might be speculative.

To this avoid this potential dispute, you may want to agree to having a business valuation. This protects the rights of both the buyer and seller.

Note: The costs for business valuations can be pretty steep. However, you share purchase agreement is essentially useless if you have no idea of what the shares are worth.

Is the Share Purchase Agreement Subject to a Right of First Refusal? Sometimes, the shareholder seeking to sell his or her shares may not be savvy enough to know whether someone else has a right of first refusal. This means that an existing shareholder may have the right to purchase the shares before you do.

This is an inquiry that your Colorado business lawyer would want to inquire about before executing the share purchase agreement. If a mistake is made, then the person with the right of first refusal may have a breach of contract claim against the seller. If money has already exchanged hands, then problems can be even more complex.

Executing a share purchase agreement/stock purchase agreement and the business sale and purchase agreement in Colorado require detailed analysis and due diligence by attorneys on both sides. Getting the proper legal help is aways a good alternative.

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