When shares in an unlisted company are to change hands, it is rarely enough in practice simply to agree on the price. The parties also need to ensure that the transfer can be carried out in accordance with the articles of association, any shareholders' agreements and the company's share register. The share transfer agreement (in Swedish, överlåtelseavtal) therefore plays a central role. It gathers the terms of the deal in one place and makes clear what is to be transferred, when it is to happen and which steps must be fulfilled for the deal to be completed correctly.
For anyone who wants to sell or buy shares outside the stock exchange, the process normally looks different from trading in listed companies. There is rarely a standardised trade with the same degree of automation. Instead, the deal often takes place through a more individual process in which the terms need to be documented clearly from the start. This is also evident in how trading in unlisted shares works in practice, where the process often involves more manual steps than trading in listed companies.
Selling shares in unlisted companies requires a clear process
A transfer of unlisted shares often rests on more judgements than a trade on the stock exchange. Buyer and seller need to agree not only on the price but also on how payment, completion and documentation are to be handled. The buyer needs to understand which rights come with the shares, whether there are restrictions on ownership and whether the transfer requires further steps under the company's internal rules. The seller, meanwhile, needs clarity on how payment is to be made and when responsibility for the shares passes over.
It is in this type of deal that the share transfer agreement shows its practical value. The agreement becomes the shared point of reference for the deal and reduces the risk of differing views arising afterwards. This is especially true when buying and selling unlisted shares, where the terms often need to be documented more carefully than in listed trading.
What a share transfer agreement is for
A share transfer agreement is normally the document that sets out the terms of the share deal. In an unlisted company it is often used to state which shares are being transferred, what price applies, how payment is to be made and when the buyer takes possession of the shares. The agreement can also specify whether the deal depends on any further step, for example that consent must be given or that a right-of-first-refusal clause (förköpsförbehåll) must first be dealt with before the transfer can be carried out correctly.
What makes the agreement particularly important in unlisted companies is that the deal can otherwise easily come to depend on verbal information and individual assumptions. There is rarely an ongoing market price to lean on, nor is there always a standardised flow that captures all the terms automatically. If there is any uncertainty about share classes, transfer restrictions or the company's ownership structure, it therefore needs to be handled actively as part of the deal itself.
What a share transfer agreement usually sets out
A share transfer agreement for unlisted shares does not need to be unnecessarily long, but it should be clear. In practice, the agreement usually contains information on:
- Who is selling and who is buying
- Which company the deal concerns
- How many shares are being transferred
- What price has been agreed
- How payment is to be made
- When completion is to take place
- Whether the deal depends on any further condition
- How documentation and practical steps are to be handled once the deal is completed
In addition, the agreement can also specify what happens if a party does not complete the deal, how a dispute is to be handled and what information the buyer received before making their decision. In some deals it can also be relevant to describe the buyer's knowledge of the company's finances and operations, especially when the parties have no long-standing prior relationship.
Check the articles of association before the deal goes further
A common mistake when trading unlisted shares is that the focus ends up on the price while the articles of association are reviewed too late. Many unlisted companies have provisions that restrict the right to transfer shares freely. These can concern consent, a right of first refusal (förköp) or post-transfer pre-emption (hembud). Such clauses can affect both how the transfer is to be carried out and who ultimately has the right to acquire the shares.
Anyone who wants to sell shares in an unlisted company should therefore check the articles of association before the agreement is concluded. If the articles of association contain a consent clause, the transfer may require the company's consent before it can be carried out correctly. The articles of association then determine whether the matter is to be decided by the board or the general meeting. If there is a right-of-first-refusal clause, other shareholders or another party with a right of first refusal may be entitled to buy the shares before the intended transfer. With a post-transfer pre-emption clause (hembud), other shareholders or another party entitled under the articles of association may instead have the right to buy out the shares after they have passed to a new owner.
For the buyer, this is at least as important. A signed agreement does not always mean that the transfer is valid or can be completed immediately. If the articles of association contain consent or right-of-first-refusal clauses, those steps need to be dealt with before the transfer can be carried out properly.
Shareholders' agreements can also affect the transfer
In addition to the articles of association, a shareholders' agreement can contain rules that affect how a sale is to take place between the parties. These can concern, for example, a right of first refusal, tag-along rights, a duty to provide information or other procedural requirements that come into play when someone wants to sell their shares.
A deal therefore often needs to be reviewed in two stages. First, you should check what the articles of association say. Then you should consider whether there is a shareholders' agreement containing further obligations between the parties. This distinction is often easier to understand if you first have a clear picture of what is meant by unlisted shares and how ownership works in unlisted companies.
How a transfer of unlisted shares usually works
Even though the terms vary from deal to deal, many transfers in unlisted companies follow roughly the same procedure:
- Seller and buyer agree on the price, number of shares and basic terms
- The articles of association and any shareholders' agreement are reviewed
- A share transfer agreement is drawn up and finalised
- Consent and rights of first refusal are dealt with before the transfer if such clauses apply
- Post-transfer pre-emption (hembud) is dealt with after the transfer if such a clause applies
- Payment and completion take place in accordance with the agreement
- The new owner is entered in the share register after the transfer, and in companies that are not CSD-registered companies (avstämningsbolag, companies whose share register is kept by Euroclear Sweden) the board is responsible for keeping the share register correctly
Compared with listed trading, changes of ownership in unlisted companies more often take place through individual and more manual transfers. For anyone following companies that are not yet listed but may become so over time, Eqvor's IPO calendar can also give broader context on where in its development a company is.
Price and valuation are rarely obvious in unlisted companies
When shares are traded on the stock exchange, there is a continuously updated market price. In unlisted companies the parties more often have to base the price themselves on previous transactions, the company's financial development, its prospects and the risk that comes with a less liquid holding. This means that the price in a share transfer agreement is rarely obvious in advance.
For the seller, it is therefore important to be able to explain how the price was arrived at. For the buyer, it is just as important to assess whether the price bears a reasonable relation to the company's situation. This applies especially to smaller unlisted companies where trading is limited and points of comparison are often fewer.
Documentation after the deal also matters
Once the deal has been completed, important steps still remain. The new owner must be entered in the share register after the transfer, and the parties should keep the share transfer agreement, payment records and other documentation showing how the deal was carried out. This matters both for the company's ownership administration and for future tax purposes.
For anyone who later has to report a sale, the records can be very important in showing the acquisition cost (omkostnadsbelopp), the sale price and the date of the transfer. This applies not least if the holding has been affected by share issues, splits or other corporate events during the holding period, since such changes can also affect how you later need to declare shares.
Where deals in unlisted companies often go wrong
Many problems arise not because the price itself is wrong, but because the process around the deal is too weak. A common mistake is to see the share transfer agreement as something that can be filled in last, once everything else has already been decided. The parties then often miss that the agreement also needs to cover completion, conditions, liability and how the payment is actually to be linked to the change of ownership.
Another recurring problem is that the articles of association are reviewed too late. A deal can then look finished between the parties even though consent or a right of first refusal must first be dealt with before the transfer can be carried out correctly, or post-transfer pre-emption may come into play after the shares have passed to a new owner. The documentation after the deal is also often underestimated. If the new owner is not clearly entered in the share register, or records are poorly kept, it can create problems both in the company's administration and later when filing a tax return.
For anyone who wants to work in a more structured way with private transactions, it is wise to see the transfer as a chain of steps where each step affects the next. This is also close to the way Eqvor describes its work to make trading in unlisted shares more accessible, transparent and digital.
A share transfer agreement needs to reflect the deal actually being made
There is no universal solution that suits every transfer in an unlisted company. A share transfer agreement needs to be drafted based on who the parties are, how the company is organised and which restrictions apply to the shares. In some situations a relatively short agreement with clear basic terms is enough. In other cases the agreement needs to be more thoroughly worked out, especially if the buyer is new to the group of owners or if the company has several documents affecting how a transfer may take place.
The share transfer agreement therefore has an important function when someone wants to sell or buy unlisted shares. The agreement ties the price discussion together with the legal, practical and administrative terms that have to work in reality. When the terms are clearly worded from the start, the deal is also easier to carry out in a way that holds up both practically and administratively.
