A share purchase is conceptually very straightforward; the buyer simply purchases the
outstanding stock of target company directly from the stockholders. The name of your
company, operations, contracts, etc. All remain in place, just with new owners.
In a share acquisition, the buyer acquires the target company’s share from its stockholders.
The target company stays exactly the same—its assets and liabilities unchanged—but with
new ownership. It is critically important in a share purchase transaction that the buyer negotiates
representations and warranties concerning the target’s business, assets, and liabilities
so that it has a complete and accurate understanding of the target company.
Share purchase virtually eliminates the need to transfer title (i.e., purchase) to all
of the many different assets used in or by the business. It also can eliminate the need to
transfer, renegotiate or reapply for things such as permits, utilities, facilities leases
and employment agreements. Of course, some contracts may have so-called “change of
control” provisions that will require special attention.
Since the target company is simply moving to a new owner, the assets of the target
remain unchanged in a share purchase, and most of the assignment and third-party consent procedures
that can cause complications or delays in an asset purchase may be avoided. A share
purchase does, however, involve a “change of control,” so the buyer must identify contracts
that require consent. For example, many real estate leases contain “change of control”
provisions requiring landlord consent.
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