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Share Transfers and Shareholding Structure
Share Transfers and Shareholding Structure
Prepared by: Constantinople
When buying company shares, relying solely on a balance sheet and price quotation supplied by the seller is insufficient. Whether the seller actually owns the shares, whether restrictions affect them and the conditions for completing the transfer must be examined. The entry of a foreign investor does not automatically remove the company's existing agreements and disputes. Pre-transaction legal due diligence is therefore important.
Request current registry records, articles of association, the share ledger, share certificates and earlier transfer documents. Significant customer and supplier agreements, loans, security, employee documents and ongoing litigation also affect the scope. Any need for authorisations and approvals is checked separately for regulated activities. The division of responsibilities between financial and tax due diligence and legal due diligence should be defined at the outset.
Identified risks should be reflected in the purchase agreement. The seller's representations, indemnities for particular debts, retention of part of the price and steps to be completed before closing are considered. It cannot be assumed that one general warranty sentence covers every risk. Incomplete disclosure also limits the review's findings; unavailable records must be stated clearly and a realistic timetable established for obtaining them.
Prepare the target company's registry and share records, agreements and transaction timetable. Include any signed preliminary agreement or deposit document in the initial review.
File review is a paid service. The scope and fee are set out in writing before work begins.