Share Purchase Agreement
Template — South Africa

Identifies the seller and purchaser, the precise number and class of shares being sold (the "sale shares"), the percentage of the company's total issued share capital represented by the sale shares, and a warranty from the seller that the shares are sold free and clear of all encumbrances, pledges, liens, options, and pre-emptive rights. It also addresses the position of any related parties and confirms whether the sale shares include all rights attaching to them, including declared but unpaid dividends and any shareholder claims.

Establishes the agreed purchase price, the valuation methodology used to determine the price (typically DCF analysis, P/E multiples, NAV, or a combination), and the pricing mechanism — whether it is a fixed price, a price subject to completion accounts adjustment, or an earn-out linked to post-closing performance. For earn-out structures, the section defines the earn-out metrics, measurement period, accounting policies, and dispute resolution for earn-out calculations. The distinction between enterprise value and equity value is addressed, with purchase price adjustments for net debt, working capital, and any normalisation adjustments.

Lists all conditions that must be fulfilled or waived before the sale can be completed. These typically include: board resolution approving the transfer, waiver of pre-emptive rights by existing shareholders (under the MOI or shareholders agreement), Competition Commission approval where the transaction constitutes a notifiable merger under the Competition Act 89 of 1998, SARB Exchange Control approval for non-resident parties, due diligence satisfaction within an agreed period, no material adverse change in the target company between signing and closing, and any regulatory or industry-specific approvals. A long-stop date (typically 3-6 months after signing) is included, after which either party may withdraw if conditions remain unfulfilled.

Comprehensive warranties from the seller regarding the target company's position, forming the contractual basis for the purchaser's investment decision. Typical warranties cover: the accuracy of financial statements and management accounts, tax compliance and the absence of outstanding tax assessments or disputes with SARS, all material contracts and their enforceability, absence of material litigation or regulatory proceedings, employee matters (including compliance with the BCEA, LRA, and employment equity legislation), intellectual property ownership and licensing, environmental compliance, B-BBEE status, data protection compliance under POPIA, and the validity of all licences and permits. Warranties are typically subject to a disclosure letter and qualified by the seller's knowledge.

Provides specific indemnities from the seller for identified pre-closing liabilities that are not adequately covered by the general warranties — such as pending tax assessments, known litigation, environmental contamination, or undisclosed employee claims. The section establishes the claims procedure (notice requirements, time limits, and the seller's right to mitigate or defend), monetary caps on the seller's total liability (typically a percentage of the purchase price), de minimis thresholds (below which individual claims cannot be made), basket amounts (aggregate thresholds before claims can be made), and the time limitations for bringing warranty and indemnity claims (typically 2 years for general warranties and 5-7 years for tax and title warranties).

Imposes post-sale restrictions on the seller to protect the goodwill and value of the business acquired. The seller is restrained from competing with the target company, soliciting its employees, or approaching its customers and suppliers for a specified period (typically 2-3 years) within a defined geographic area (typically South Africa, or specific provinces). Under South African common law as confirmed in Basson v Chilwan and subsequent cases, restraint of trade clauses are prima facie enforceable unless proved to be unreasonable — and the onus is on the party seeking to escape the restraint to demonstrate that enforcement would be contrary to the public interest. The section ensures the restraint is proportionate and enforceable under current South African case law.

Details the step-by-step process for closing the transaction, including: delivery of signed share transfer forms (CM42/CoR42) by the seller, payment of the purchase price into the seller's nominated bank account (or into escrow pending completion of post-closing adjustments), delivery of the share certificates, board resolution of the target company approving the registration of the transfer and updating the securities register, resignation of nominated directors and appointment of the purchaser's nominees, delivery of all statutory records and company documents, and the simultaneous execution of any ancillary agreements (such as a new shareholders agreement or deed of adherence). Payment is typically made against delivery on a simultaneous exchange basis.

Addresses the comprehensive tax implications of the share transfer. Securities Transfer Tax (STT) at 0.25% of the greater of the purchase price or the market value of the shares is payable by the purchaser under the Securities Transfer Tax Act 25 of 2007. The seller bears capital gains tax on the profit from the disposal — with the effective rate depending on the seller's status (individual, company, or trust). For non-resident sellers, Section 35A of the Income Tax Act may require the purchaser to withhold an amount on account of the seller's potential CGT liability and remit it to SARS. The section also addresses the VAT implications (shares are generally exempt from VAT as a financial service under Section 12(a) of the VAT Act), any dividends tax implications for declared but unpaid dividends, and the specific tax provisions applicable to B-BBEE transactions.

Where the share purchase results in a change of control and the parties exceed the prescribed merger notification thresholds under the Competition Act 89 of 1998, this section sets out the notification procedure, the parties' obligations to cooperate in preparing and filing the merger notification, the allocation of filing fees (typically borne by the purchaser), and the remedies available if the Competition Commission imposes conditions or prohibits the merger. It also addresses the prohibition on implementing the transaction before Competition Commission approval and the penalties for non-compliance — including administrative penalties of up to 10% of annual turnover and potential voidance of the transaction.

Where either the seller or purchaser is a non-resident of South Africa, this section addresses compliance with the Exchange Control Regulations administered by the SARB. For non-resident sellers, it covers the endorsement of share certificates, the channelling of sale proceeds through the Authorised Dealer system, and the withholding obligations under Section 35A of the Income Tax Act. For non-resident purchasers, it addresses the "Non-Resident" endorsement on share certificates, the documentation of the inward investment through the Authorised Dealer, and the future repatriation rights for dividends and capital.

Specifies that the agreement is governed by the laws of the Republic of South Africa and establishes a structured dispute resolution process — negotiation, mediation under AFSA rules, and binding arbitration. Expert determination provisions are included for valuation and accounting disputes (such as completion accounts adjustments and earn-out calculations), with the expert's determination being final and binding in the absence of manifest error. Provisions for urgent interim relief through the courts are included where necessary. The costs provision follows the general South African rule that the unsuccessful party pays the successful party's costs on a party-and-party scale.