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Non-binding Letter of Intent for Share Purchase UK

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Written by Brad Askew Solicitor (non-practising)
Brad is on the roll of solicitors of England & Wales but does not hold a practising certificate and does not provide legal advice.
Updated June 2026 · England & Wales
When two parties start talking about a share purchase, neither side usually wants to commit before they have looked under the bonnet. A non-binding letter of intent sits comfortably in that early window. It puts on paper what the buyer and seller have talked through so far, without creating contractual obligations to actually complete the transaction. Think of it as a written handshake: a record that you are both serious enough to keep talking, to share information, and to work towards a formal share purchase agreement. In UK deal-making, this kind of letter often runs alongside, or replaces, a traditional heads of terms document. It helps both sides test whether the numbers and structure make sense before they spend real money on lawyers, accountants and due diligence.

What this document is

A non-binding letter of intent for a share purchase is a short written document that captures the headline terms of a proposed deal to buy shares in a company. It usually identifies the buyer, the seller, the target company, the shares being discussed, an indicative price, and the key conditions the buyer expects to attach to any formal offer.

The critical feature is the word non-binding. The letter is drafted so that, apart from a few specific clauses such as confidentiality or exclusivity, nothing in it forces either party to proceed. Either side can walk away without paying damages for breaking off the talks.

In practice, buyers use these letters to show intent to investors and lenders, while sellers use them to judge whether a prospective buyer is credible before opening up the books. The letter is not a substitute for a share purchase agreement.

It simply marks the starting point of a negotiation and sets expectations for what comes next, including due diligence, warranties, disclosures and completion mechanics.

How to use this document

  1. Set out who is involved and what is being bought. Name the buyer, the seller and the target company, and describe the shareholding in clear terms. State how many shares are in scope, what percentage of the company that represents, and whether the deal is for the whole issued share capital or only part of it. Clarity here prevents awkward misunderstandings later.
  2. State the headline commercial terms. Set out the indicative purchase price, how it was calculated, and whether it assumes a cash-free, debt-free position. Describe the proposed payment structure, for example cash on completion, deferred consideration, earn-outs or share-for-share exchange. Flag any assumptions you are relying on, so the seller knows what could move the number.
  3. Make the non-binding status unmistakable. Include a clear clause stating that the letter does not create any legally binding obligation to proceed with the transaction. Call out which clauses, if any, are intended to bind the parties, typically confidentiality and sometimes exclusivity. Without this wording, a court could potentially read commitments into the document that neither side intended.
  4. Address confidentiality and exclusivity. Decide whether you want a period during which the seller cannot negotiate with other buyers, often called a lock-out or exclusivity period. Agree how confidential information shared during talks will be handled and for how long. These clauses are commonly drafted to be legally binding even within an otherwise non-binding letter.
  5. Map out the route to a formal agreement. Set out the next steps: the scope of due diligence, who pays their own costs, the expected timeline, any key conditions such as board or shareholder approval, and what happens to confidential information if the deal falls away. This gives both sides a realistic picture of the work ahead before they sign.
If you're dealing with this kind of situation, speak to an experienced legal adviser who can walk you through it — from £89.

Common questions

Q Is a non-binding letter of intent actually non-binding?
Mostly, yes, if it is drafted carefully. The main commercial terms, price, structure, and the commitment to complete, are typically expressed as non-binding. However, certain clauses such as confidentiality, exclusivity, costs and governing law are often drafted as binding. English courts look at the wording and the parties' conduct, so unclear drafting can create unintended obligations.
Q How is it different from a share purchase agreement?
A share purchase agreement is the definitive contract that actually transfers the shares and contains detailed warranties, indemnities, conditions and completion mechanics. A letter of intent is an early-stage document that sketches out intent before lawyers draft the full agreement. One is a signpost, the other is the road itself.
Q Do I need a solicitor to prepare one?
You are not legally required to use a solicitor, but share transactions involve warranties, tax considerations and company law issues that are easy to get wrong. Even at the letter of intent stage, poorly chosen wording can bind you to terms you did not intend. Taking legal input early is usually cheaper than fixing problems later.
Q Should the letter include exclusivity?
That depends on the balance of power. Buyers often want exclusivity so they can spend on due diligence without being outbid mid-process. Sellers often resist, or grant only a short window. If exclusivity is included, it should be drafted as a binding clause with a clear end date, even inside an otherwise non-binding letter.
Q What happens if talks break down after signing the letter?
If the document is genuinely non-binding as to the transaction itself, either side can walk away without liability for the deal not completing. Binding clauses, such as confidentiality obligations or agreements about who bears costs, usually survive. Information shared under a confidentiality clause must still be protected under its terms.
Q Can the letter be used as evidence later?
Yes. Even when non-binding, the letter can be referenced to show what the parties understood at the outset, what assumptions underpinned the price, and what was agreed about confidentiality or exclusivity. That is one reason why careful drafting matters, because the wording can shape later negotiations and any dispute.
Q Does stamp duty or tax apply at this stage?
No tax is triggered simply by signing a non-binding letter of intent, because no shares are actually transferred. Stamp duty on shares, capital gains considerations and other tax points arise when the share purchase agreement completes. That said, the tax structure often shapes the deal terms set out in the letter, so it is worth discussing with an adviser early.
If you're dealing with this kind of situation, speak to an experienced legal adviser who can walk you through it — from £89.

Sources

This guide is based on primary UK law and official guidance.

Brad Askew, Solicitor (non-practising)

Written & reviewed by

Brad Askew Solicitor (non-practising)

Brad is on the roll of solicitors of England & Wales but does not hold a practising certificate and does not provide legal advice. LegalDocuments.co.uk is not a law firm and does not provide regulated legal advice.

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Legal disclaimer
This article is for general information only. It is a tool to help you find your way — not legal advice, and not a substitute for speaking to a qualified adviser about your situation.