Taking over a company and business by purchasing its shares (instead of purchasing the assets) can lead to an easier transition. This is because the essential contracts with customers, suppliers and employees will stay in place. However, there are risks. The idea of purchasing all of the shares in a private company may appear reasonably basic once you have agreed on a purchase price. Yet, as the buyer, there are several important documents and steps to ensure that you obtain the shares' legal title. One such document is the share sale agreement. This article will explore what documents you will need when purchasing all of a company's shares.

Share Sale Agreement

A share sale agreement is the longest and most detailed document you will handle when purchasing a company's shares. While other documents in the transaction are essential, you should devote most of your attention and effort to getting this document correct. It is a common mistake that people try to rush this document. A well-drafted share sale agreement will, among others, address the following items:

  • the number of shares you will purchase;
  • the purchase price for the shares;
  • whether you will buy the shares in a lump sum or by instalments;
  • if there are conditions which need to be satisfied before the sale can complete, for example, the landlord's consent;
  • the obligations on completion to allow for the legal transfer of ownership – termed completion obligations;
  • a full set of promises (also known as warranties) the seller should provide about the shares, business and company;
  • if there will be a non-compete preventing the seller from operating a similar business after completion; and
  • confidentiality and dispute resolution provisions.


Usually, the seller's lawyer will draft this agreement, and your lawyer will review it. During negotiations, your lawyer's role is to strike the right balance between the seller and you (as the buyer). The seller's lawyer will often draft the share sale agreement to be very favourable to the seller. Thus, you should prepare yourself for several rounds of negotiations, which can take a couple of weeks to months. A skilled lawyer will guide you through this process and explain the critical legal points.

The most heavily negotiated points often relate to what will happen if there is a breach or disagreement in the future. This includes the limits on the seller's liability where one of the warranties (promises) is untrue and the amount of time you have to bring a claim.

There are standard warranties included in most agreements. However, the most important will be those specific to the business in question, which are highlighted by your investigations of the business. An example includes, the seller not being aware of any reason a client could terminate their contract.

Due Diligence

Purchasing all of a company's shares comes with ownership of any of its past trading risks. This can include debts to the Australian Taxation Office or work done for customers.

The first step to protect yourself is to complete due diligence on the company. This can involve both legal and financial due diligence. Your legal team can assist by conducting searches of the company and reviewing key contracts. For example, you should ensure that the contracts are satisfactory to lock in key clients.

Your accountant or financial advisor can review the business's financial records to provide you with details concerning:

  • the business's value; and
  • risks relating to taxation, payroll, and superannuation.

The timing of due diligence can occur before or after you have signed the share sale agreement. If after, the agreement should allow you to walk away from the sale if you discover anything unsatisfactory. You can also address any risks that you uncover by adding additional warranties.

Completion Obligations

The share sale agreement will set out several completion obligations. These are obligations that you must complete, or the seller must hand over at completion. Many of these will relate to assurances about the seller's ability to sell the shares and the company's approval of it. Also, there must be approval of the change in control relating to the shareholders and directors.

Generally, these include the following documents:

  • Directors resolution – a written resolution signed by the directors approving the transfer of the shares, cancellation or issue of share certificates and any directors resignations and appointments;
  • Shareholders resolution – a written resolution of the shareholders approving the transfer of the shares and accepting the waiver of any pre-emptive rights;
  • Waiver of pre-emptive rights – the shareholder will all sign this waiver to confirm that they are not enacting their rights to purchase the shares;
  • Share Transfer Form – a form which sets out the transfer of the shares from the seller to you, and the purchase price paid for the shares;
  • Share Certificate – the seller's share certificate will be cancelled, and a new share certificate issued to you; and
  • Appointment/removal of directors – the current directors will need to provide signed notices of resignation, and the new directors will need to sign letters of consent to act.

Shareholders' Rights

If the company has a Shareholders Agreement and Constitution, you should review these documents to ensure that the sale complies with these documents' requirements.

Most companies have a Shareholders Agreement that provides shareholders with 'pre-emptive rights' to purchase shares if they are being sold or issued. This means that current shareholders have the first opportunity to buy shares being sold or issued. If they have this right, then all of the selling shareholders will need to sign a waiver of these pre-emptive rights.

Notification to ASIC

Once a share sale has completed, the company must notify ASIC within 28 days of the changes to shareholders, directors and any address changes. You can do this by completing Form 484 available on the ASIC website.