Share Buyback Agreement
Template — South Africa

Records the fundamental terms of the buyback — the number and class of shares to be repurchased, the identity of the selling shareholder, the buyback price per share, and the total buyback consideration. The pricing section specifies the valuation methodology used to determine the price (typically an independent valuation using DCF, P/E multiples, or NAV), and addresses the premium or discount applied relative to the last independently determined fair value. For listed companies, the section addresses the relationship between the buyback price and the volume-weighted average price (VWAP) on the JSE.

The most critical section of any share buyback agreement. The board of directors must formally certify — by resolution — that the company satisfies the solvency and liquidity test under Section 4 of the Companies Act both immediately before and immediately after the buyback. The solvency limb requires that assets (fairly valued) exceed liabilities (fairly valued). The liquidity limb requires that the company can pay its debts as they fall due in the ordinary course of business for 12 months post-buyback. Each director who votes in favour of this certification bears personal liability under Section 77(3)(e)(vi) if the certification was made without reasonable grounds for belief. The template includes a detailed solvency and liquidity report framework for the board's consideration.

Documents the board resolution authorising the buyback, confirming that the board has the authority to repurchase shares under the company's MOI and the Companies Act. The resolution must reference the solvency and liquidity certification, identify the shares to be repurchased, approve the buyback price, and delegate authority to specific directors to implement the transaction. Where the buyback triggers the special resolution requirement under Section 48(8) — either because more than 5% of any class is being repurchased or because the seller is a director, prescribed officer, or related person — the board resolution must also convene a shareholders' meeting or circulate a round-robin resolution.

Where required under Section 48(8) of the Companies Act, this section documents the special resolution of shareholders authorising the buyback. A special resolution requires at least 75% of voting rights exercised in favour. The section specifies the notice requirements (at least 10 business days for a meeting or 20 business days for a round-robin resolution), the record date for determining which shareholders are entitled to vote, and the disclosure requirements — shareholders must receive sufficient information about the buyback (including the solvency and liquidity test results, the buyback price, and the impact on remaining shareholders) to make an informed decision.

Establishes the total buyback consideration, the payment method (cash, deferred payment, or a combination), the payment schedule (lump sum on closing or instalments over an agreed period), and any security or escrow arrangements for deferred payments. Where payment is deferred, the section addresses interest on outstanding amounts, the company's obligation to provide security (such as a pledge over assets or a bank guarantee), and the consequences of default — including the potential acceleration of the entire outstanding balance and the seller's right to unwind the buyback.

Specifies whether the repurchased shares will be cancelled or held as treasury shares. Under Section 35(5) of the Companies Act, shares repurchased by the company itself are cancelled and restored to the status of authorised but unissued shares. However, shares acquired by a subsidiary of the company are held as treasury shares under Section 48(3), with restricted rights — they cannot vote and do not receive dividends. The choice between cancellation and treasury holding has practical implications: cancellation permanently reduces the company's issued share capital, while treasury shares can potentially be reissued in the future (subject to board and shareholder approval). The securities register must be updated to reflect the cancellation or treasury holding, and CIPC must be notified of any change to issued share capital.

Addresses the complex tax implications of the buyback. Under the Income Tax Act 58 of 1962, the buyback consideration must be split between a "dividend" component and a "capital" component. The dividend component — being the amount by which the buyback price per share exceeds the company's contributed tax capital (CTC) per share — is subject to Dividends Tax at 20% under Section 64E. The capital component — being the CTC per share returned — is treated as proceeds on the disposal of shares for CGT purposes. The company is responsible for determining and communicating this split to the selling shareholder, and for withholding and remitting the Dividends Tax to SARS. Errors in the dividend/capital allocation can result in over- or under-taxation and penalties from SARS.

Warranties from the selling shareholder that they hold clear and unencumbered title to the sale shares, that the shares are not subject to any pledge, lien, option, or other encumbrance, and that the seller has the capacity and authority to sell the shares. Company warranties include confirmation of valid incorporation, authority to enter into the buyback, compliance with the solvency and liquidity test, and confirmation that all required approvals (board and shareholder) have been obtained. Where the seller is a trust or juristic person, additional warranties regarding the authorising resolutions and the signatory's authority are included.

Lists all conditions that must be fulfilled before the buyback can be completed, including: board resolution authorising the buyback and certifying solvency and liquidity, special resolution of shareholders (where required under Section 48(8)), confirmation that the buyback does not conflict with any provision of the company's MOI, waiver of any pre-emptive rights or first-refusal rights under the shareholders agreement, Exchange Control approval from SARB (where the seller is a non-resident), and satisfaction of any conditions in the company's loan agreements or facility letters that restrict distributions or share repurchases (many loan agreements contain distribution covenants that must be complied with).

Analyses the effect of the buyback on the remaining shareholders' proportional ownership, voting rights, and dividend entitlements. Where the repurchased shares are cancelled, the remaining shareholders' percentage holding increases automatically. The section addresses the notification requirements for remaining shareholders, the impact on any shareholders agreement provisions (such as quorum requirements, voting thresholds, and reserved matters), and the potential need to amend the shareholders agreement or MOI to reflect the post-buyback shareholding structure.

Sets out the post-closing filing and administrative obligations: updating the company's securities register under Section 50 of the Companies Act, filing the prescribed notice of change in issued share capital with CIPC, cancelling or endorsing share certificates, remitting Dividends Tax to SARS within the prescribed period, and updating the company's B-BBEE certificate if the buyback changes the ownership profile. For companies with loan facilities, the section addresses notification obligations to lenders under financial covenant clauses.

Specifies that the agreement is governed by the laws of the Republic of South Africa and establishes a structured dispute resolution process — negotiation between the parties' principals, mediation under AFSA rules, and binding arbitration as the primary mechanism. Expert determination provisions are included for valuation disputes (where the buyback price is based on an independent valuation that is contested by either party). The costs provision follows the general South African rule that the unsuccessful party pays the successful party's legal costs on a party-and-party basis.