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Shareholder Redemption Agreement

Shareholder Redemption Agreement Template for South Africa

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Key Requirements PROMPT example:

Shareholder Redemption Agreement

"I need a Shareholder Redemption Agreement for our private tech company to buy back 25% of shares from a retiring founder, with payment to be made in three installments over 2025, including non-compete provisions and ongoing consultancy arrangements."

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Document background
The Shareholder Redemption Agreement is a crucial document in South African corporate practice, used when a company wishes to buy back its shares from existing shareholders. This agreement becomes necessary in various scenarios, including company restructuring, exit of shareholders, or capital structure optimization. The document must comply with the Companies Act 71 of 2008 and other relevant South African legislation, particularly regarding share capital maintenance rules and solvency requirements. It typically includes detailed provisions on valuation methodology, payment terms, completion mechanics, and necessary regulatory approvals. The agreement is essential for protecting both the company's and shareholders' interests while ensuring a smooth and legally compliant share redemption process.
Suggested Sections

1. Parties: Identification of the company and the shareholder(s) whose shares are being redeemed

2. Background: Context of the agreement including current shareholding structure and reason for redemption

3. Definitions and Interpretation: Definitions of key terms and interpretation rules for the agreement

4. Share Redemption: Core terms of the redemption including number of shares, class, and redemption date

5. Redemption Price: Specification of the price per share and total redemption amount

6. Payment Terms: Terms and method of payment for the redeemed shares

7. Conditions Precedent: Any conditions that must be met before the redemption can take place

8. Completion Requirements: Steps to be taken to complete the redemption including document delivery

9. Representations and Warranties: Standard warranties from both parties regarding capacity, authority, and share ownership

10. Tax Provisions: Allocation of responsibility for taxes arising from the redemption

11. Confidentiality: Obligations regarding confidential information

12. Notices: Process for giving formal notices under the agreement

13. General Provisions: Standard boilerplate clauses including governing law and jurisdiction

Optional Sections

1. Staged Redemption: Used when the redemption will occur in multiple phases over time

2. Financing Arrangements: Include when specific financing arrangements are needed for the redemption

3. Share Valuation Mechanism: Detailed valuation process when price is not pre-determined

4. Tag-Along Rights: Rights of other shareholders in case of partial redemption

5. Security Arrangements: Used when security is provided for deferred payment

6. Director Resignation: Include when the selling shareholder is also resigning as director

7. Non-Compete Provisions: Restrictions on the departing shareholder's future activities

8. Dispute Resolution: Alternative dispute resolution mechanisms if preferred over court proceedings

Suggested Schedules

1. Share Certificate Details: Details of share certificates being redeemed

2. Payment Schedule: Schedule of payments if redemption price is paid in installments

3. Valuation Methodology: Detailed methodology for calculating share value

4. Company Resolution: Board resolution approving the share redemption

5. Shareholder Resolution: Shareholder resolution if required for the redemption

6. Completion Checklist: List of actions and documents required for completion

7. Form of Transfer: Pro forma share transfer documentation

8. Related Party Contracts: List of any contracts between company and departing shareholder to be terminated

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Agreement
Board
Business Day
Companies Act
Company
Completion
Completion Date
Conditions Precedent
Confidential Information
Encumbrance
Financial Year
IFRS
Independent Expert
Long Stop Date
Material Adverse Change
MOI
Parties
Purchase Price
Rand
Redemption Notice
Redemption Price
Redemption Shares
Related Party
Remaining Shareholders
SARS
Securities Transfer Tax
Selling Shareholder
Share Certificate
Shareholders
Shares
Signature Date
South African Law
Tax
Transaction
Transfer Secretary
Valuation Date
Warranties
Relevant Industries

Financial Services

Professional Services

Technology

Manufacturing

Mining

Retail

Healthcare

Real Estate

Agriculture

Construction

Energy

Telecommunications

Transport and Logistics

Education

Professional Services

Relevant Teams

Legal

Finance

Corporate Governance

Compliance

Board Secretariat

Risk Management

Corporate Affairs

Treasury

Investor Relations

Executive Management

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Company Secretary

Legal Counsel

Corporate Lawyer

Financial Director

Board Director

Compliance Officer

Corporate Governance Officer

Investment Manager

Financial Manager

Managing Director

Shareholder Relations Manager

Corporate Finance Manager

Risk Manager

Industries
Companies Act 71 of 2008: Primary legislation governing company operations in South Africa, including provisions for share capital, share transfers, and redemption procedures
Income Tax Act 58 of 1962: Governs the tax implications of share redemptions, including capital gains tax considerations and securities transfer tax
Financial Markets Act 19 of 2012: Relevant for listed companies, governing securities trading and market regulation
Consumer Protection Act 68 of 2008: May apply to certain aspects of the agreement, particularly regarding fairness of terms and consumer rights
Financial Intelligence Centre Act 38 of 2001: Ensures compliance with anti-money laundering regulations in financial transactions including share transfers
Common Law of Contract: Principles of contract law that govern the formation and enforcement of agreements in South Africa
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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