Document background
A Preliminary Share Purchase Agreement is commonly used in South African corporate transactions as the first formal step in a share acquisition process. It serves to document the parties' initial understanding and commitment while maintaining flexibility for detailed due diligence and negotiations. This type of agreement is particularly important in the South African context where transactions may require various regulatory approvals (such as Competition Commission or Reserve Bank clearance) and must comply with specific local corporate law requirements. The document typically includes preliminary purchase price mechanisms, exclusivity periods, confidentiality obligations, and conditions precedent, while establishing the framework for more detailed transaction documents to follow. It provides protection for both parties during the negotiation phase while maintaining the preliminary nature of the arrangement.
