Cross Purchase Agreement for Nigeria

Cross Purchase Agreement Template for Nigeria

A Cross Purchase Agreement governed by Nigerian law is a legally binding contract between business owners that establishes the terms and conditions under which one owner's business interest can be purchased by the other owners upon specific triggering events such as death, disability, retirement, or voluntary departure. The agreement ensures business continuity and provides a clear framework for ownership transitions while complying with Nigerian corporate law requirements, particularly the Companies and Allied Matters Act (CAMA) 2020. It includes detailed provisions for valuation methods, purchase procedures, funding mechanisms, and necessary corporate governance approvals.

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What is a Cross Purchase Agreement?

A Cross Purchase Agreement is essential for businesses in Nigeria seeking to establish clear succession and transition planning. This document becomes particularly relevant for private companies with multiple shareholders or partners who want to maintain control over ownership changes and ensure business continuity. The agreement must comply with Nigerian legislation, particularly CAMA 2020, and typically includes provisions for valuation, payment terms, and transfer procedures. It's commonly used alongside life insurance policies to fund potential purchases and requires careful consideration of tax implications under Nigerian tax laws. The agreement helps prevent potential disputes and provides certainty for business owners while protecting the company's long-term interests and stability.

What sections should be included in a Cross Purchase Agreement?

1. Parties: Identification of all business owners participating in the agreement

2. Background: Context of the business structure and purpose of the agreement

3. Definitions: Key terms used throughout the agreement including triggering events, fair market value, and other specific terminology

4. Purchase Obligation: Core obligations of surviving/remaining owners to purchase shares upon triggering events

5. Triggering Events: Specific events that activate the purchase obligation (death, disability, retirement, etc.)

6. Purchase Price and Valuation: Methodology for determining the purchase price of business interests

7. Payment Terms: Structure and timing of payments for purchased interests

8. Funding Mechanism: Details of how purchases will be funded, including insurance policies if applicable

9. Transfer Procedures: Process and requirements for executing the transfer of business interests

10. Representations and Warranties: Standard declarations regarding authority, ownership, and compliance

11. Confidentiality: Provisions protecting sensitive business information

12. Governing Law and Jurisdiction: Specification of Nigerian law as governing law and jurisdiction for disputes

13. Dispute Resolution: Procedures for resolving disagreements between parties

14. Notices: Requirements for formal communications between parties

15. General Provisions: Standard boilerplate clauses including severability, entire agreement, and amendments

What sections are optional to include in a Cross Purchase Agreement?

1. Tag-Along Rights: Optional provision giving minority owners the right to join in a sale by majority owners

2. Drag-Along Rights: Optional provision allowing majority owners to force minority owners to join in a sale

3. Right of First Refusal: Optional provision giving existing owners priority rights to purchase shares before external sale

4. Insurance Requirements: Detailed section on insurance policies when life insurance is used as funding mechanism

5. Foreign Exchange Provisions: Required when agreement involves international parties or foreign currency transactions

6. Tax Matters: Specific provisions addressing tax implications and responsibilities

7. Company Option to Purchase: Alternative provision allowing the company itself to purchase shares before individual owners

8. Spousal Consent: Required when owners' spouses need to acknowledge and approve the agreement

What schedules should be included in a Cross Purchase Agreement?

1. Schedule 1 - Current Ownership Structure: Details of current ownership percentages and share distribution

2. Schedule 2 - Valuation Formula: Detailed methodology for calculating business value and share price

3. Schedule 3 - Insurance Policies: List of insurance policies and details when used as funding mechanism

4. Schedule 4 - Transfer Documentation: Template forms for share transfer and related documentation

5. Schedule 5 - Contact Information: Detailed contact information for all parties and relevant advisors

6. Appendix A - Corporate Documents: Copies of relevant corporate documents including registration certificates

7. Appendix B - Consent Forms: Template consent forms including spousal consent where required

8. Appendix C - Valuation Reports: Most recent business valuation reports or certificates

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

Jurisdiction

Nigeria

Publisher

Genie AI

Document Type

Purchase Agreement

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Professional Services

Technology

Manufacturing

Oil and Gas

Financial Services

Healthcare

Real Estate

Retail and Consumer Goods

Agriculture

Construction

Transportation and Logistics

Media and Entertainment

Education

Mining

Telecommunications

Relevant Teams

Legal

Corporate Secretariat

Finance

Tax

Compliance

Risk Management

Corporate Development

Executive Leadership

Board of Directors

Treasury

Relevant Roles

Chief Executive Officer

Managing Director

Business Owner

Company Director

Partner

Chief Financial Officer

Corporate Lawyer

Legal Counsel

Company Secretary

Business Development Director

Risk Manager

Financial Controller

Tax Director

Compliance Officer

Board Member

Shareholder

Industries
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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