A Share Purchase Agreement (SPA) is the central document in any business acquisition or sale process. It is not a simple standard form; it is a complex legal instrument that allocates risks between the buyer and the seller. The SPA defines not only the price and payment terms but also includes extensive Warranties from the seller regarding the company's condition and Indemnification mechanisms if these warranties are breached. In Georgia, where transferring company shares in the Public Registry is a straightforward procedure, parties often overlook the importance of a detailed SPA, which is a mistake. It is the SPA that protects the buyer from hidden tax liabilities, litigation, and other "skeletons in the closet." Specialists on Legal.ge ensure that your agreement is solid, detailed, and tailored to your interests.
What Does Share Purchase Agreement Service Cover?
Our corporate lawyers offer full service regarding SPA drafting and negotiation:
- Price Adjustment Mechanisms: Defining methods for adjusting the price based on Working Capital or Net Debt on the closing date.
- Representations & Warranties: Detailed promises from the seller regarding company assets, taxes, employees, and intellectual property.
- Conditions Precedent: Conditions that must be met before the deal closes (e.g., regulatory approval, bank consent).
- Indemnification: Mechanisms for how and how much the seller will compensate the buyer if warranties turn out to be false (including De Minimis and Basket thresholds).
- Non-Compete: The seller's obligation not to open a competing business for a certain period after the transaction.
Real-World Scenarios When You Need This Service
An SPA is essential for transactions of any size:
- Full Business Buyout (100%): When an investor buys the entire company. The SPA is the main document governing the transfer.
- Minority Share Purchase: When a partner buys another partner's share. It is important to consider the existing Shareholders' Agreement here.
- Deferred Payment: When the price is paid in installments. The SPA must ensure payment guarantees (e.g., share pledge).
- Use of Escrow Account: Part of the funds is frozen for a period to cover potential tax fines. The SPA regulates the release conditions of these funds.
Georgian Legal Framework and Regulations
Share purchase is regulated by the Law on Entrepreneurs and the Civil Code. The Law on Entrepreneurs states that an agreement for the alienation of LLC shares must be notarized or signed at the Public Registry. However, the SPA itself (which regulates terms rather than the immediate registration) can be in simple written form. It is also important to consider the Tax Code — share sales may be subject to income or profit tax (on capital gains), although they are often exempt from VAT. A lawyer will help you navigate these nuances.
Service Process
The SPA preparation process on Legal.ge includes:
- Term Sheet Analysis: Reviewing agreed commercial terms.
- Integrating DD Results: Reflecting identified risks in warranty and indemnification clauses.
- First Draft: Preparing the initial version of the agreement.
- Negotiation: Refining terms with the counterparty.
- Signing and Registration: Executing the agreement and transferring ownership in the registry.
Why Choose Legal.ge?
A good SPA balances the interests of the buyer and seller. Lawyers on Legal.ge have experience on both "Buy-side" and "Sell-side" positions. We know what the market standard is regarding warranties and liability caps, helping you conclude a fair and secure deal.
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