Share Purchase Agreement Governing Law: Key Legal Considerations
May 4, 2022Unlocking the Power of Share Purchase Agreement Governing Law
Share purchase agreements are an essential part of any business transaction involving the sale of shares. Agreements set terms conditions sale, including governing law apply case disputes. While it may seem like a mundane legal concept, the governing law of a share purchase agreement plays a crucial role in determining the rights and obligations of the parties involved.
The Importance of Governing Law
When parties from different jurisdictions enter into a share purchase agreement, the governing law clause becomes essential. Determines jurisdiction`s laws apply case disputes legal agreement. Significant impact outcome litigation arbitration.
Case Study: Smith v. Jones
In a recent case, Smith and Jones, two business partners, entered into a share purchase agreement for the sale of their company. Agreement stated governing law laws state New York. Dispute arose regarding valuation shares, parties found subject complex often laws New York. This case serves as a reminder of the importance of carefully considering the governing law clause in a share purchase agreement.
Statistics on Share Purchase Agreement Governing Law
According to a recent survey of business lawyers, 85% of share purchase agreements include a governing law clause. Of those agreements, 60% specify the laws of a particular state, while 40% choose the laws of a foreign jurisdiction. Statistics highlight widespread use The Importance of Governing Law clauses share purchase agreements.
Best Practices for Drafting Governing Law Clauses
When drafting a share purchase agreement, it is essential to carefully consider the governing law clause. Parties should seek legal advice to ensure that the chosen jurisdiction`s laws align with their interests and expectations. Additionally, parties should consider the enforceability of the chosen jurisdiction`s laws in the event of a dispute.
| Key Considerations | Best Practices |
|---|---|
| Choice Jurisdiction | Consider the legal and business implications of the chosen jurisdiction`s laws. |
| Enforceability | Ensure that the chosen jurisdiction`s laws are enforceable in the event of a dispute. |
| Legal Advice | Seek legal advice to ensure that the governing law clause aligns with the parties` interests. |
The governing law clause in a share purchase agreement may seem like a technicality, but it can have a significant impact on the outcome of any disputes or legal issues. By carefully considering the implications of the chosen jurisdiction`s laws and seeking legal advice, parties can ensure that their interests are protected in the event of any disagreement.
Frequently Asked Questions about Share Purchase Agreement Governing Law
| Question | Answer |
|---|---|
| 1. What is the governing law in a share purchase agreement? | The governing law in a share purchase agreement determines the legal framework within which the agreement is interpreted and enforced. It is crucial for parties to agree on the governing law to avoid potential disputes in the future. |
| 2. Can the governing law be different from the parties` home country laws? | Yes, the governing law chosen in a share purchase agreement can be different from the parties` home country laws. This is often seen in international transactions where parties select a neutral jurisdiction to govern their agreement. |
| 3. What factors should be considered when selecting the governing law? | When choosing the governing law for a share purchase agreement, parties should consider the legal system, enforcement of judgments, and the potential impact on the agreement. It`s essential to seek legal advice to make an informed decision. |
| 4. How does the governing law affect dispute resolution? | The governing law dictates the process and procedures for dispute resolution in a share purchase agreement. It determines the court or arbitration venue, applicable laws, and the enforceability of judgments. |
| 5. Can parties change the governing law after signing the agreement? | Changing the governing law after signing the share purchase agreement may require mutual consent from all parties involved. Involve amendment agreement carefully considered legal advice. |
| 6. Are there any restrictions on the choice of governing law? | While parties generally have the freedom to choose the governing law in a share purchase agreement, some jurisdictions may have limitations or public policy considerations that restrict certain choices. It`s important to check the laws of the chosen jurisdiction. |
| 7. What happens if the governing law is not specified in the agreement? | If the governing law is not explicitly stated in the share purchase agreement, it may lead to uncertainty and potential conflicts in case of disputes. It`s best practice to clearly identify the governing law to avoid such situations. |
| 8. How does the governing law impact taxation in a share purchase agreement? | The governing law can have implications for taxation in a share purchase agreement, particularly in cross-border transactions. It`s advisable for parties to seek tax advice to understand the potential tax consequences of their choice of governing law. |
| 9. Can the governing law impact the enforceability of the agreement? | Yes, the governing law can impact the enforceability of the share purchase agreement. Different jurisdictions have varying legal standards and procedures for enforcement, which can influence the outcome of disputes and obligations under the agreement. |
| 10. Is it common to include a governing law clause in share purchase agreements? | Yes, it is standard practice to include a governing law clause in share purchase agreements to provide clarity and certainty for all parties involved. This clause helps to avoid potential conflicts and ensures that the agreement is governed by a known legal framework. |
Share Purchase Agreement Governing Law
This Share Purchase Agreement Governing Law (“Agreement”) is entered into on this __ day of __, 20__, by and between the parties named below.
| Party A | [Insert Name] |
|---|---|
| Party B | [Insert Name] |
WHEREAS, Party A and Party B (collectively, the “Parties”) desire to enter into an agreement regarding the purchase and sale of shares;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
- Governing Law. This Agreement governed construed accordance laws State [Insert State], without giving effect choice law conflict law provisions.
- Dispute Resolution. Any dispute arising connection Agreement resolved arbitration accordance rules American Arbitration Association.
- Severability. If provision Agreement determined invalid unenforceable, remaining provisions continue valid enforceable fullest extent permitted law.
- Entire Agreement. This Agreement constitutes entire understanding agreement Parties respect subject matter hereof supersedes prior negotiations, understandings, agreements, oral written.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written.
| Party A | Party B |
|---|---|
| [Signature] | [Signature] |
| [Print Name] | [Print Name] |