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Stock Redemption Agreement

Stock Redemption Agreement Template for South Africa

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Key Requirements PROMPT example:

Stock Redemption Agreement

"I need a Stock Redemption Agreement for our South African private company to repurchase 25,000 ordinary shares from a retiring founding shareholder, with payment to be made in three installments over 2025, and the agreement needs to include non-compete provisions."

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Document background
The Stock Redemption Agreement is a crucial document used when a South African company wishes to repurchase its own shares from existing shareholders. This type of agreement is commonly employed in scenarios such as shareholder exits, corporate restructuring, or implementation of succession planning. The document must strictly comply with the Companies Act 71 of 2008, particularly sections 46 and 48 regarding distributions and share repurchases. It includes essential provisions for price determination, payment mechanisms, and regulatory compliance, including mandatory solvency and liquidity tests. The agreement also addresses tax implications under South African law and may require various regulatory approvals depending on the transaction size and nature of the business.
Suggested Sections

1. Parties: Identification of the Company and the Selling Shareholder(s)

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

3. Definitions: Definitions of key terms used throughout the agreement

4. Sale and Purchase: Core terms of the share redemption, including number of shares and price

5. Purchase Price: Detailed terms of consideration, payment method, and timing

6. Conditions Precedent: Required conditions to be met before the agreement becomes effective, including regulatory approvals

7. Completion: Process and requirements for closing the transaction

8. Representations and Warranties: Standard warranties from both parties, including company's solvency and liquidity test compliance

9. Tax Matters: Allocation of tax liabilities and responsibilities

10. Confidentiality: Obligations regarding confidential information

11. Notices: Communication procedures between parties

12. General Provisions: Standard boilerplate clauses including governing law, jurisdiction, and entire agreement

13. Signature: Execution blocks for all parties

Optional Sections

1. Tag-Along Rights: Include when other shareholders retain tag-along rights that may be triggered by the redemption

2. Regulatory Compliance: Include for listed companies or when specific regulatory requirements apply

3. Security for Payment: Include when payment is to be made in installments or deferred

4. Non-Competition: Include when selling shareholder is required to agree to non-compete provisions

5. Director Resignation: Include when selling shareholder is also resigning from director positions

6. Continuing Obligations: Include when selling shareholder retains certain ongoing obligations or rights

7. Earn-out Provisions: Include when part of the purchase price is contingent on future performance

Suggested Schedules

1. Share Details: Details of shares being redeemed including share certificates numbers and class of shares

2. Purchase Price Calculation: Detailed calculation of the purchase price including any adjustments

3. Completion Requirements: Checklist of documents and actions required for completion

4. Board Resolution: Copy of board resolution approving the share redemption

5. Shareholder Resolution: Copy of shareholder resolution if required for the redemption

6. Regulatory Approvals: Copies of any required regulatory approvals or filings

7. Tax Clearance: Tax clearance certificates or relevant tax documentation

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
Income Tax Act
Insolvency Event
Material Adverse Change
Purchase Price
Redemption Shares
Related Party
Remaining Shareholders
SARS
Securities Register
Selling Shareholder
Share Certificates
Signature Date
Solvency and Liquidity Test
South African Reserve Bank
Takeover Regulations
Tax
Tax Authority
Transaction
Transfer Secretary
Warranties
Relevant Industries

Financial Services

Professional Services

Manufacturing

Technology

Retail

Mining

Agriculture

Healthcare

Real Estate

Telecommunications

Energy

Construction

Private Equity

Family Businesses

Relevant Teams

Legal

Finance

Corporate Secretariat

Treasury

Tax

Compliance

Risk Management

Corporate Development

Shareholder Relations

Board Secretariat

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Company Secretary

Legal Counsel

Corporate Attorney

Financial Director

Managing Director

Board Member

Compliance Officer

Tax Director

Corporate Finance Manager

Investment Manager

Shareholder Relations Manager

Treasury Manager

Risk Manager

Industries
Companies Act 71 of 2008: Primary legislation governing company operations in South Africa, including share capital, share redemptions, and corporate actions. Particularly sections 48 (Company purchasing its own shares) and 46 (Distributions) are crucial for stock redemption agreements.
Income Tax Act 58 of 1962: Deals with tax implications of share redemptions, including capital gains tax considerations and dividend tax implications of share buybacks.
Financial Markets Act 19 of 2012: Regulates financial markets and securities trading, relevant if the company is listed or if the redemption involves regulated securities.
Competition Act 89 of 1998: May be relevant for larger stock redemption transactions that could impact market concentration or require merger control approval.
Exchange Control Regulations: Relevant if the stock redemption involves cross-border transactions or foreign shareholders.
Consumer Protection Act 68 of 2008: May be applicable if the stock redemption agreement involves individual shareholders who qualify as consumers under the Act.
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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