Share Purchase Agreement Disputes

Since the company is a separate legal entity from its shareholders, the company`s debts belong to the company and cannot normally be passed on to the seller. Here, a well-developed share purchase agreement can help. Even if you don`t agree or have broken the agreement, not everyone should be lost. They acquired 100% of the share capital issued in a limited company. Everything seemed perfect for your needs, sound finances, complete orders, loyal customer base and no significant liabilities… And then you start to manage everyday life. They are beginning to realize that the company`s assets have been artificially inflated by debts that do not appear to be recoverable, or that there are hidden tax liabilities or that outgoing directors have approved inappropriate or unprofitable contracts. Maybe major employees leave and occupy a significant portion of your customer base, or an employee has a serious complaint against the company for discrimination or unfair dismissal. You may even find that the company is responsible for the debts or questionable activities of a former parent company. In any case, you suddenly discover that the company is worth much less than what you paid. At the beginning of the GSO, the identity of the seller and buyer, including their addresses and your statutory headquarters, is described if it is a company or other legal body. If the business is owned by more than one shareholder, it is important for the buyer to ensure that each seller is responsible for the total amount of debt (joint and several liability) or, if not, as the distribution of liability is distributed among the individual sellers.

The judge rejected the MacAlisters` argument and found that it was wrong to take the purchase price as a reference to the value of Motorplus, without taking into account the full conclusions of the experts. The judge thus rejected the price paid as conclusive evidence of the value of the shares “as justified” at the time of the GSO, on the grounds that all parties had entered the GSO, knowing that the price did not represent the full value of the market, the transaction having been concluded quickly and against cash payment. The judge noted that Motorplus`s value was “as justified” of approximately $3 million. Since the judge found that Motorplus was in fact of no value, it was the amount of damages suffered by Cardamon as a result of the offence. The judge reduced that figure by $500,000 to reflect the de minimis rule, which left about $2.5 million and then applied the cap to the purchase price of $2.38 million. Cardamon was then able to recover the full purchase price. A share purchase agreement is probably long and consists of a main document and different calendars or annexes containing specific information and details of the transaction. While a SPA can be in any format, the following are the most important clauses, and those that should ideally be designed by an experienced legal expert.

A target company subject to a share purchase agreement cannot be insolvent, i.e. not pay its debts. 36. The target company was not involved in disputes with the tax authorities.5 The seller is the sole owner and registered owner of the shares The parties dispute the value of the shares “as collateral”. The MacAlisters submitted that this was due to the purchase price of the G.S.O. (in which case the amount recovered would have been US$2.38 million less than the $500,000 de minimis threshold).


Please signup or login to answer this question.