A Preliminary Share Purchase Agreement is commonly used in South African corporate transactions as the first formal step in a share acquisition process. It serves to document the parties' initial understanding and commitment while maintaining flexibility for detailed due diligence and negotiations. This type of agreement is particularly important in the South African context where transactions may require various regulatory approvals (such as Competition Commission or Reserve Bank clearance) and must comply with specific local corporate law requirements. The document typically includes preliminary purchase price mechanisms, exclusivity periods, confidentiality obligations, and conditions precedent, while establishing the framework for more detailed transaction documents to follow. It provides protection for both parties during the negotiation phase while maintaining the preliminary nature of the arrangement.
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1. Parties: Identification of the seller(s) and purchaser(s), including registration numbers for companies
2. Background: Context of the transaction, including brief description of the target company and commercial rationale
3. Definitions and Interpretation: Key terms used in the agreement, including specific South African legal terminology
4. Sale and Purchase: Basic agreement to sell and purchase shares, subject to conditions
5. Purchase Price: Preliminary agreement on purchase price or pricing mechanism
6. Conditions Precedent: Key conditions that must be met before proceeding to final agreement
7. Due Diligence: Framework for conducting due diligence investigation
8. Exclusivity: Commitment not to negotiate with other parties during the specified period
9. Confidentiality: Obligations regarding confidential information exchanged during negotiations
10. Costs: Allocation of costs and expenses
11. Duration and Termination: Period of validity and circumstances for termination
12. Notices: Communication procedures between parties
13. General Terms: Standard boilerplate provisions including governing law, jurisdiction, and entire agreement
1. Deposit: Terms for any initial deposit or earnest money, if required
2. Break Fee: Provisions for compensation if either party terminates negotiations, used in larger transactions
3. Management and Control: Preliminary agreements on post-completion management, useful for strategic investments
4. Employee Matters: Preliminary agreements on key employees and management, relevant for management-heavy businesses
5. Interim Period Obligations: Obligations of the seller regarding company operation during negotiations, important for operating businesses
6. Exchange Control: Specific provisions for foreign buyers requiring Reserve Bank approval
7. Competition Law Compliance: Required for transactions meeting competition law thresholds
1. Details of the Target Company: Company information including registration details, share capital structure, and subsidiaries
2. Initial Purchase Price Calculations: Preliminary valuation metrics and price adjustment mechanisms
3. Due Diligence Scope: Outline of areas to be covered in due diligence investigation
4. Timetable: Proposed timeline for key milestones including due diligence, definitive agreements, and closing
5. Required Consents: List of regulatory and third-party approvals required
6. Form of Confidentiality Agreement: Detailed confidentiality terms if not included in main agreement
7. Excluded Assets/Liabilities: Any specific assets or liabilities excluded from the transaction scope
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