Share Purchase Agreement

A Share Purchase Agreement is a legally binding contract that governs the sale and purchase of shares in a company. It outlines the terms and conditions of the transaction, including the number and type of shares being sold, the purchase price, and any conditions that must be met before the sale can be completed. The Share Purchase Agreement also typically includes representations and warranties made by the seller regarding the shares being sold, as well as indemnification provisions to protect the buyer in case any of these representations or warranties are untrue.

The Share Purchase Agreement is a crucial document in mergers and acquisitions (M&A) and other transactions involving the transfer of ownership in a company. It helps ensure that both parties understand their rights and obligations regarding the sale of shares and provides a framework for resolving any disputes that may arise during or after the transaction. Overall, the Share Purchase Agreement plays a vital role in facilitating the smooth and legally compliant transfer of ownership in a company.

A Share Purchase Agreement typically includes several key components to define the terms and conditions of the share sale. Here are the main elements commonly found:

Identification of Parties:
Names and details of the buyer(s) and seller(s), as well as the company whose shares are being sold.

Purchase Details:
Description of the shares being sold, including the number of shares, class of shares, and any specific rights attached to the shares.

Purchase Price:
The total price for the shares, including the payment terms and any adjustments based on conditions like working capital or debt levels at closing.

Representations and Warranties:
Statements made by the seller regarding the shares, the company, and other relevant matters, which the seller asserts to be true and accurate.

Covenants:
Agreements by the parties regarding certain actions or restrictions to be followed before or after the sale, such as non-compete clauses or requirements for maintaining certain business operations.

Conditions Precedent:
Events or actions that must occur before the sale can be completed, such as regulatory approvals or shareholder consents.

Indemnification:
Provision for one party to compensate the other for losses or damages arising from breaches of the agreement or other specified events.

Closing Procedures:
Details on how and when the transaction will be completed, including the transfer of shares, payment of the purchase price, and any other necessary actions.

These elements collectively form a comprehensive agreement that governs the sale and purchase of shares in a company. The specific terms and provisions of an Share Purchase Agreement can vary depending on the nature of the transaction and the preferences of the parties involved.

A Share Purchase Agreement and a Shareholders Agreement are two distinct legal documents that govern different aspects of share ownership in a company. Here are the key differences between the two:

After signing a Share Purchase Agreement in Vietnam, several key steps typically follow to complete the transaction and transfer ownership of the shares. Here is an overview of what typically happens after signing a Share Purchase Agreement:

1. Fulfillment of Conditions Precedent:
Parties must fulfill any conditions precedent outlined in the SPA. This could include obtaining regulatory approvals, shareholder consents, or other specific actions.

2. Payment:
The buyer pays the agreed-upon purchase price to the seller, usually in accordance with the payment terms specified in the Share Purchase Agreement.

3. Transfer of Shares:
The seller transfers the shares to the buyer, following the procedures required by law and any additional requirements in the Share Purchase Agreement.

4. Registration:
The transfer of shares is registered with the relevant authorities, such as the Department of Planning and Investment or the Securities Depository Center, depending on the type of company and shares involved.

5. Issuance of New Shares:
If new shares are issued as part of the transaction, the company’s board of directors or shareholders’ meeting may need to approve the issuance and update the company’s share registry.

6. Post-Closing Obligations:
The Share Purchase Agreement may include obligations that extend beyond the closing, such as indemnification provisions, non-compete agreements, or other commitments that the parties must fulfill.

7. Announcement:
In some cases, the transaction may need to be publicly announced, especially if the company is publicly traded or if the transaction is significant.

8. Integration:
The buyer may begin integrating the acquired business into its own operations, implementing any changes or synergies planned as part of the acquisition.

Warranties and representations in a Share Purchase Agreement are statements made by the seller regarding various aspects of the company being sold. These statements are intended to provide assurance to the buyer about the state of the company and the shares being sold. While the specific warranties and representations can vary depending on the nature of the transaction and the parties involved, here are some common examples:

Yes, there are tax implications associated with a Share Purchase Agreement in Vietnam. The specific tax implications can vary depending on various factors, including the nature of the transaction, the parties involved, and the type of shares being transferred. Here are some common tax considerations:

Corporate Income Tax (CIT): In Vietnam, capital gains derived from the transfer of shares are generally subject to CIT at the standard rate of 20%. The tax base is the difference between the selling price and the initial cost of the shares, adjusted for certain allowances and deductions.

Value Added Tax (VAT): The transfer of shares in a company is generally not subject to VAT in Vietnam. However, certain services related to the transfer, such as brokerage services, may be subject to VAT at the standard rate of 10%.

Stamp Duty: Stamp duty may be applicable on the Share Purchase Agreement document itself, depending on the value of the transaction and the specific regulations in the relevant jurisdiction. The rate can vary but is typically relatively low.

Withholding Tax (WHT): If the seller is a foreign entity, the buyer may be required to withhold tax on the purchase price at the rate applicable to foreign residents, currently 0.1% or 5%, depending on the nature of the transaction and the tax treaties between Vietnam and the seller’s country.

Other Considerations: Depending on the specific circumstances of the transaction, there may be other tax implications to consider, such as transfer pricing rules, thin capitalization rules, and anti-avoidance provisions.

It’s important for parties involved in a share purchase transaction in Vietnam to carefully consider the tax implications and seek professional advice to ensure compliance with tax laws and optimize their tax position.

When drafting or signing a Share Purchase Agreement in Vietnam, there are several common pitfalls that parties should avoid to ensure a smooth transaction and protect their interests. Some of these pitfalls include:

Avoiding these common pitfalls can help parties navigate the complexities of drafting and signing a Share Purchase Agreement in Vietnam and ensure a successful and legally compliant transaction.

Yes, a Share Purchase Agreement can be used to transfer partial ownership of a company. When a party wants to acquire only a portion of the shares of a company, rather than acquiring all of the shares, a partial transfer can be accomplished through a Share Purchase Agreement. The Share Purchase Agreement would specify the number or percentage of shares being transferred, along with the corresponding purchase price and other terms and conditions of the transaction.

In a partial ownership transfer, the buyer would acquire the specified number or percentage of shares and would become a partial owner of the company. The seller would retain ownership of the remaining shares. The Share Purchase Agreement would outline the rights and obligations of the buyer and seller with respect to their respective shareholdings, including voting rights, dividend entitlements, and other matters.

It’s important to note that a partial ownership transfer may require approval from the company’s board of directors or shareholders, depending on the company’s organizational structure and governing documents. Additionally, the Share Purchase Agreement would need to comply with all applicable laws and regulations governing share transfers in the jurisdiction where the company is incorporated.

Disputes arising from a Share Purchase Agreement (SPA) in Vietnam can be resolved through various methods, including litigation, arbitration, and mediation. The specific method of dispute resolution may depend on the preferences of the parties and the terms of the SPA. Here is an overview of the common methods of resolving disputes in an SPA in Vietnam:

1. Litigation: Parties can resolve disputes through the court system in Vietnam. Litigation is a formal process where parties present their case to a judge, who then issues a binding decision. Litigation can be time-consuming and costly, but it provides a final and enforceable resolution.

2. Arbitration: Arbitration is a form of alternative dispute resolution where parties agree to submit their dispute to an arbitrator or panel of arbitrators, who then issue a binding decision. Arbitration is often faster and more flexible than litigation, and the proceedings are generally private. Arbitration awards are also generally easier to enforce internationally.

3. Mediation: Mediation is a voluntary process where a neutral third party, the mediator, helps the parties reach a mutually acceptable solution. Mediation is less adversarial than litigation and arbitration and can be faster and less expensive. However, the outcome is not binding unless the parties agree to make it so.

4. Negotiation: Parties can also resolve disputes through negotiation, either directly or with the assistance of legal counsel or other representatives. Negotiation is often the first step in resolving a dispute and can be effective in reaching a mutually acceptable solution without the need for formal proceedings.

In Vietnam, arbitration is a popular choice for resolving commercial disputes, particularly for international transactions. The Vietnam International Arbitration Centre (VIAC) is a well-known arbitral institution in Vietnam that administers arbitration proceedings. However, parties should carefully consider the advantages and disadvantages of each method of dispute resolution before deciding on the most appropriate approach for their situation.