7 TYPES OF AGREEMENTS AND WHEN TO USE THEM (1)

1. Share Purchase Agreement (SPA)

A Share Purchase Agreement is a contract between a buyer and a seller wherein the seller agrees to sell shares of a company to the buyer. This agreement details the terms and conditions of the sale, including the number of shares being sold, the purchase price, and any warranties and indemnities.

When to Use: Use SPAs when transferring ownership of shares from one party to another, especially in mergers, acquisitions, or when an investor is buying into a business.

2. Share Sale Agreement

Similar to a Share Purchase Agreement, a Share Sale Agreement outlines the sale of shares from a seller to a buyer. It focuses on the obligations and rights of the seller in the transaction.

When to Use: Use this agreement specifically to document the seller's terms and conditions in a share transaction, often used in business buyouts or equity sales.

3. Asset Purchase Agreement (APA)

APAs are used to sell or purchase a company's assets rather than its shares. This can include tangible assets like equipment and inventory, as well as intangible assets like intellectual property and goodwill.

When to Use: Use an APA when buying or selling specific assets of a corporation, not the entire business entity. This is common in business restructurings or when acquiring specific assets of a business without assuming the liabilities of the entire business.

4. Asset Sale Agreement

Similar to an Asset Purchase Agreement, this contract outlines the terms of the sale of assets from a seller to a buyer. It details what assets are being sold, the purchase price, and any conditions of the sale.

When to Use: Use this agreement when selling specific assets of a business, ensuring clear terms on what is being transferred and the responsibilities of each party.

5. Subscription Agreement

A Subscription Agreement is a contract between an investor and a company, where the investor agrees to purchase shares or units of the company, often in a private placement or new issuance of shares.

When to Use: Use a Subscription Agreement when issuing new shares to investors, particularly in startups or private companies seeking to raise capital.

6. Franchise Agreement

A Franchise Agreement outlines the relationship between a franchisor and a franchisee, granting the franchisee the right to operate a business under the franchisor’s brand and system.

When to Use: Use a Franchise Agreement when expanding a business model through franchising, allowing others to operate businesses using your brand, trademark, and business methods.

7. Distribution Agreement

This is usually between a supplier and a distributor, detailing the terms under which the distributor can sell and market the supplier’s products.

When to Use: Use a Distribution Agreement to formalize the relationship with distributors, setting terms for product distribution, marketing, territory, and pricing.

- Jumi Odepe, LL.B., LL.M., B.L.

Jumi Odepe is the Principal lawyer at Jode Law. She represents clients in Corporate, Commercial and Business Law Transactions including mergers and acquisitions, corporate restructuring, and corporate financing. Jumi also represents clients in Immigration Law and Estate Law transactions.

The articles published by Jode Law are intended as general information only and do not serve as legal advice. By reading, the reader understands there is no solicitor-client relationship established. If you have a legal question, consult a lawyer.