When it comes to buying or selling a company, a share purchase agreement (SPA) is a vital document that outlines the terms and conditions of the transaction. However, in some cases, the buyer may require additional protection in the form of a guarantor.
A share purchase agreement guarantor is a third party that guarantees the obligations of the seller under the SPA. This means that if the seller fails to fulfill their obligations under the SPA, the guarantor will step in and fulfill those obligations on behalf of the seller.
The role of the guarantor is to provide the buyer with additional security and protection in case the seller breaches the terms of the SPA. This is particularly important if the buyer is purchasing shares in a company that has outstanding liabilities or potential legal disputes.
There are different types of share purchase agreement guarantees, including personal guarantees, corporate guarantees, and third-party guarantees. In a personal guarantee, an individual provides the guarantee, while in a corporate guarantee, a company provides the guarantee. A third-party guarantee is provided by a party other than the seller or buyer, such as a bank or insurance company.
The terms of the share purchase agreement guarantor should be clearly outlined in the SPA. This includes the responsibilities of the guarantor, the circumstances under which the guarantee will be triggered, and the process for making a claim against the guarantor.
In some cases, the seller may resist the inclusion of a guarantor in the SPA, as it may increase their costs or reduce their bargaining power. However, it is important for the buyer to insist on a guarantor if they feel they need additional protection.
In summary, a share purchase agreement guarantor provides the buyer with extra security and protection in case the seller fails to fulfill their obligations under the SPA. The terms of the guarantor should be clearly outlined in the SPA, and the buyer should insist on a guarantor if they feel it is necessary.