The Shareholder Termination Agreement is a critical document used when one or more shareholders wish to exit their ownership position in a Saudi Arabian company. It becomes necessary when shareholders decide to part ways due to various circumstances such as strategic disagreements, retirement, or business restructuring. The agreement must comply with Saudi Companies Law, Capital Market Authority regulations (for listed companies), and Sharia principles. It typically includes detailed provisions for share valuation, payment mechanisms, regulatory approvals from the Ministry of Commerce, and requirements for updating the commercial registration. The document serves to protect all parties' interests while ensuring a smooth transition of ownership and preventing future disputes. Special considerations are included for foreign investment scenarios, tax and Zakat obligations, and ongoing business operations.
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1. Parties: Identification of all parties including the departing shareholder(s), remaining shareholders, and the company
2. Background: Context of the shareholding relationship, reference to original shareholders agreement, and reason for termination
3. Definitions: Key terms used throughout the agreement, including specific Saudi law terminology
4. Share Valuation: Agreed value of shares and valuation methodology in compliance with Saudi Companies Law
5. Payment Terms: Structure and timing of payment for shares, including any Sharia-compliant financing arrangements
6. Completion Requirements: Steps required to complete the termination, including regulatory filings with Ministry of Commerce
7. Mutual Release and Waiver: Release of claims and obligations between parties, subject to Sharia principles
8. Confidentiality: Ongoing obligations regarding company information and trade secrets
9. Tax and Zakat Matters: Treatment of tax and Zakat obligations pre and post termination
10. Governing Law and Jurisdiction: Confirmation of Saudi law governance and jurisdiction of Saudi courts
11. Notices: Communication procedures between parties for agreement purposes
12. Execution: Signature requirements and execution formalities under Saudi law
1. Non-Compete Provisions: Restrictions on departing shareholder's future business activities - include if competitive concerns exist
2. Intellectual Property Rights: Treatment of IP rights where departing shareholder was involved in IP development
3. Ongoing Projects: Handling of incomplete projects or contracts where departing shareholder was involved
4. Employee Matters: Include if departing shareholder has employment relationship or management role
5. Transitional Services: Include if departing shareholder needs to provide temporary services post-termination
6. Earn-out Provisions: Include if part of share value is tied to future performance
7. Foreign Investment Provisions: Include if departing shareholder is a foreign investor requiring SAGIA compliance
1. Share Certificate Details: Copy of share certificates and transfer documentation
2. Valuation Report: Independent valuation report or agreed calculation method
3. Payment Schedule: Detailed payment terms and installment schedule if applicable
4. Company Documents: Relevant corporate documents including shareholders agreement and articles
5. Regulatory Approvals: List of required governmental approvals and filing requirements
6. Outstanding Obligations: List of any outstanding obligations or liabilities
7. Board Resolutions: Corporate approvals for the termination
8. Completion Checklist: Step-by-step list of actions required to complete the termination
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