Legal Intellectual

Tired of unprofessional or promotional legal answers?
Daeryun specialist lawyers will answer your questions.

What should be included in the contract when transferring shares?

At the request of an acquaintance, I decided to take over a portion of a company's shares, and so I came to proceed with a share transfer. Because there is a relationship of trust between us, I considered whether an oral agreement alone would suffice, but after hearing that a dispute could arise later, I am trying to prepare a contract. I would like to know what must be included in a share transfer agreement, and what items could become a problem if omitted.

share transfer

Answer to Related Inquiry

Author: 김국일

A share transfer agreement must include the key items without fail, because failing to clearly define the transaction terms and the scope of liability can lead to future disputes.

A share transfer is a transaction in which the rights and status of a shareholder are transferred, so the content of the agreement is very important.

Therefore, a share transfer agreement should include the following items step by step.

① Specification of the parties and the share details

The personal details of the transferor and the transferee, the target company, the number of shares, and the equity ratio must be clearly stated.

If it is not specified which shares are being transferred, the agreement itself may become unclear.

② The transfer price and payment terms

This is the most important part of a share transfer, and not only the amount but also the timing and method of payment (such as bank transfer) and whether payment is made in installments must be specifically determined.

③ Representations and warranties provisions

This is content in which the transferor warrants that it is the lawful owner of the shares concerned and defines the scope of liability regarding whether the company has hidden debts or legal issues.

④ Liability and damages provisions

This must specify how liability will be borne if facts differing from the contract are discovered, and how the scope of damages will be determined.

⑤ The share transfer procedure and timing

This must determine when the share transfer is completed and how the change in the register of shareholders or the transfer of title will be carried out.

A share transfer agreement is a key document that serves as the standard in the event of a future dispute, and if representations and warranties or liability provisions are omitted, you may end up bearing unexpected debts or even legal issues, so caution is required.

In addition, because other matters such as confidentiality provisions and conditions precedent must also be set, careful handling is required.

Therefore, when proceeding with a share transfer, it is important to clearly organize the transaction terms and reflect them in the agreement, and where the structure is complex or the amount is large, it is necessary to review the contract content in advance through a legal review.