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Buying or selling a company is rarely a straightforward transaction. Unlike an asset sale, where individual items are transferred piece by piece, a share sale moves the entire company, including its contracts, staff, obligations, and history, from one set of hands to another.
The document that sits at the heart of this process is the Share Purchase Agreement, commonly shortened to SPA. It records the commercial deal, allocates risk between the parties, and sets out what happens if things turn out differently from what was promised.
Whether you are the outgoing shareholder hoping to walk away cleanly or the incoming buyer keen to protect what you are paying for, getting the SPA right matters. This guide walks through what an SPA does, the clauses you should expect to see, and the issues that tend to cause friction during negotiations.
What this document is
A Share Purchase Agreement is the contract that governs the sale of shares in a company from one party to another. Because a company is a separate legal person, when you buy its shares you are taking on everything that sits inside it: the trading contracts, the tax position, the employees, the leases, the disputes, and anything else that has happened under its watch.
That makes the SPA a fundamentally different animal from an asset purchase, where the buyer can cherry-pick what they want and leave the rest behind. The SPA sets out the price, how and when it is paid, what the seller is promising about the company, and what the buyer can do if those promises turn out to be untrue.
It also typically contains restrictions on what the seller can do after completion, so they cannot simply walk across the road and start a competing business. In larger deals, the SPA sits alongside a suite of other documents including disclosure letters, tax deeds, and transitional services arrangements. For smaller private company sales, the SPA often does most of the heavy lifting on its own.
How to use this document
Agree heads of terms. Before drafting begins, the parties usually sign a short heads of terms document that captures the headline commercial points: the price, what is being sold, key conditions, and any exclusivity period. It is not usually legally binding on the main deal terms, but it gives both sides a shared starting point and helps advisers scope the work.
Carry out due diligence. The buyer investigates the company in detail, looking at financials, contracts, tax history, employment matters, litigation, intellectual property, and regulatory compliance. What the due diligence uncovers shapes the warranties, the price, and sometimes whether the deal proceeds at all. Sellers should expect wide-ranging information requests and plan for them early.
Negotiate the SPA. Lawyers on both sides work through the draft, arguing over risk allocation, warranty scope, limitations on liability, caps, time limits, and the disclosure process. Sellers push for narrow warranties and tight caps; buyers push for broad protection. This stage often takes longer than either party expects, especially where the due diligence has thrown up issues.
Prepare the disclosure letter. The seller produces a disclosure letter setting out specific exceptions to the warranties. Anything properly disclosed usually cannot then form the basis of a warranty claim. Getting disclosure right protects the seller from later disputes and gives the buyer a clear picture of what they are taking on.
Exchange and complete. On exchange, both parties sign the SPA and are legally bound to proceed. Completion, where the shares transfer and the money changes hands, can happen simultaneously or later if conditions need to be satisfied first. Stock transfer forms are signed, board resolutions are passed, and the company's registers are updated.
Template · England & Wales
Share purchase agreement
This is an agreement for the sale of a majority or a minority shareholding in a private company for cash (rather than shares). The company could be in any industry, and the seller and the buyer could be private individuals or other companies.
Templates are provided by Net Lawman. We may receive a commission at no extra cost to you.
Common questions
Q What is the difference between a share sale and an asset sale?
In a share sale, the buyer acquires the company itself by purchasing its shares, inheriting everything inside it including liabilities. In an asset sale, the buyer picks specific assets such as stock, equipment, or goodwill, and leaves the selling company (and often its liabilities) behind. Share sales tend to be simpler for sellers but riskier for buyers, which is why warranties and indemnities matter so much.
Q What are warranties in a Share Purchase Agreement?
Warranties are statements the seller makes about the company: that the accounts are accurate, that tax has been paid, that there is no pending litigation, and so on. If a warranty turns out to be untrue, the buyer can generally claim damages. Warranties are usually heavily negotiated, with sellers seeking to limit their exposure through caps, time limits, and materiality thresholds.
Q What does a disclosure letter do?
The disclosure letter sits alongside the SPA and lists specific matters that qualify the seller's warranties. If something is properly disclosed, the buyer generally cannot bring a warranty claim about it later. The letter protects the seller from being sued over issues the buyer already knew about, and it incentivises full, honest communication during the deal.
Q Are restrictive covenants on the seller enforceable?
Post-completion restrictions, such as non-compete and non-solicitation clauses, can be enforceable in England and Wales if they go no further than is reasonably necessary to protect the buyer's legitimate interests. Courts look at scope, geography, and duration. Overly broad restrictions risk being struck down entirely, so careful drafting matters to both sides.
Q Do I need a tax deed as well as an SPA?
On most share deals, yes. A tax deed (sometimes called a tax covenant) gives the buyer a pound-for-pound indemnity for pre-completion tax liabilities that surface after the sale. It sits alongside the SPA's tax warranties and operates differently, without the usual limitations that apply to warranty claims.
Q How long does it take to complete a share sale?
It varies. A small, uncomplicated deal can move from heads of terms to completion in a few weeks. Larger transactions, or those involving regulated sectors, property, or significant due diligence findings, can take several months. Timelines depend on how quickly information is produced, how complex the negotiations get, and whether any conditions need satisfying before completion.
Q What happens if the buyer discovers a problem after completion?
If the issue is covered by a warranty that was not disclosed, the buyer may have a claim for damages, subject to the limits in the SPA. If it is a pre-completion tax matter, the tax deed may respond. Buyers typically have a defined window to bring claims, and the SPA will set out notice requirements, so acting quickly is usually essential.
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.
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.
