The Term Sheet For Share Purchase Agreement is a crucial preliminary document used in South African corporate transactions to establish the fundamental terms of a proposed share acquisition. It serves as a roadmap for the transaction and subsequent detailed documentation, typically used after initial commercial terms are agreed but before detailed due diligence and final agreement drafting. The document captures key commercial points such as price, payment structure, conditions precedent, and timeline, while also addressing South African regulatory requirements including those under the Companies Act, Competition Act, and Exchange Control Regulations where applicable. While mostly non-binding, it often includes binding provisions on confidentiality, exclusivity, and costs. This document is particularly important in the South African context where transactions may require various regulatory approvals and must comply with specific local legal requirements, including B-BBEE considerations in certain cases.
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1. Parties: Identification of the seller(s), purchaser(s), and the target company, including full legal names and registration details
2. Background: Brief context of the proposed transaction and current shareholding structure
3. Definitions: Key terms used throughout the term sheet
4. Transaction Structure: Description of the proposed share purchase, including number and class of shares being sold
5. Purchase Price: Detailed breakdown of the purchase consideration, payment terms, and any adjustments
6. Payment Terms: Timeline and method of payment, including any escrow arrangements or deferred payments
7. Conditions Precedent: Key conditions that must be satisfied before the transaction can complete
8. Timing: Expected timeline for signing the definitive agreement and closing the transaction
9. Exclusivity: Period during which the seller cannot negotiate with other potential buyers
10. Confidentiality: Obligations regarding the confidentiality of the transaction and related information
11. Costs: Allocation of transaction costs between the parties
12. Binding Effect: Clarification of which terms are binding and non-binding
1. Due Diligence: Include when detailed due diligence process needs to be outlined - typically for larger or complex transactions
2. Warranties and Indemnities: High-level description of key warranties - include for larger transactions or where specific risks need to be addressed
3. Management and Employment: Include when there are key management retention or employment terms to be agreed
4. Regulatory Approvals: Include when transaction requires specific regulatory approvals (e.g., competition authority)
5. Post-Closing Covenants: Include when specific post-closing obligations need to be highlighted
6. Break Fee: Include when parties want to specify consequences of not proceeding with the transaction
7. Dispute Resolution: Include when parties want to specify particular dispute resolution mechanisms
8. Governing Law and Jurisdiction: Include when transaction has cross-border elements or specific jurisdictional requirements
1. Share Capital Structure: Detailed breakdown of the target company's share capital structure
2. Key Commercial Terms: Summary of material commercial terms to be included in the final agreement
3. Timetable: Detailed timeline of key transaction milestones and deadlines
4. Material Contracts: List of key contracts requiring consent or review
5. Required Consents: List of third-party and regulatory consents required
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