Basic documentation
When buying shares in an unlisted company, more paperwork is often required compared to exchange trading. Here are the most important documents you will encounter.
Share Purchase Agreement (SPA)
The core of the transaction is the share purchase agreement. This contract governs:
- Who is selling and who is buying
- Number of shares and price per share
- Specific terms and warranties
- Closing date (when ownership transfers)
Contract note
A contract note acts as the receipt for the transaction itself. It specifies the purchase amount, any commission, and the settlement date. This document is often required by your bank as proof of origin for the funds and serves as documentation for future tax returns.
Consent and right of first refusal
Many unlisted companies have requirements in their articles of association or shareholders' agreement stating that certain documentation is required before the transaction becomes fully valid.
- Waivers: A formal document where existing owners waive their right of first refusal to buy the shares before you.
- Board consent: A board resolution record stating the board has approved you as a buyer and sanctioned the stock ledger update.
Accession agreement
When you become a shareholder, the company often mandates you formally join the existing shareholders' agreement. This is done via a shorter accession agreement where you agree to abide by the main agreement's terms regarding voting and future share sales.
Summary
Be meticulous with the paperwork surrounding an unlisted deal. A properly signed share purchase agreement anchoring the board's resolution combined with an updated share register forms your true proof of ownership.