I am a shareholder in a private company – should I have a share certificate?
Yes – under section 768 of the Companies Act 2006 a share certificate specifying the shares held by a member is prima facie evidence of title to the shares.
How soon after shares are allotted should I receive a share certificate?
Within two months after the allotment of its shares a company must complete and have ready for delivery the certificates for the shares allotted (section 769 of the Companies Act 2006).
I want to transfer my shares to someone else – can I do this?
You can do this if the company’s articles of association and any shareholders’ agreement allows you to and you use a proper instrument of transfer such as a stock transfer form.
What is an ‘SPA’?
An SPA is a share purchase agreement. The share purchase agreement is usually a lengthy document, a third of which comprises the main operative provisions and up to half of which can be devoted to a schedule of warranties.
Should I give warranties?
A company could very easily be acquired via a simple stock transfer form, but the law provides no protection for the buyer as to the assets and the liabilities of the company. Extensive contractual statements in the form of warranties are therefore the only way in which a buyer can find out information about the true value of the company and obtain some form of redress if any of those statements prove to be untrue.
What if a warranty isn’t true?
If a warranted fact turns out to be untrue, the buyer has a claim for breach of contract regardless of whether he relied on the warranty in question. However, no claim will lie if the facts which give rise to the breach were disclosed. A seller who fails to disclose a relevant matter in respect of the warranties runs the risk of being sued for breach of warranty.
What is an indemnity?
An indemnity is a promise to reimburse the buyer in respect of a particular type of liability. The purpose of an indemnity is to provide a guaranteed remedy (on a pound-for-pound basis) for the buyer where a breach of warranty may not give rise to a claim in damages, or to provide a specific remedy which might not otherwise be available at law.
Catherine Carlton is a Corporate and Commercial Solicitor at Stephens Scown. Please contact Catherine in our Exeter office if you would like to discuss this further (email@example.com).