Harper James advises UK businesses on share purchase agreements under the laws of England and Wales. A share purchase agreement (SPA) is the contract through which a buyer acquires shares in a company from its existing shareholders, transferring ownership of the company rather than purchasing selected business assets.
An SPA normally identifies the buyer, seller and target company, describes the shares being sold, and sets the purchase price. It also addresses the payment structure, including completion payments, deferred consideration, earn-outs, escrow arrangements and any price adjustment based on completion accounts or a locked-box mechanism. The agreement should state whether the transaction transfers all shares or only a defined percentage, and how the parties will deal with minority holdings.
Due diligence examines the target’s legal, financial and commercial position before signing. Its scope commonly includes material contracts, employment arrangements, intellectual property, property, disputes, finance, tax and data protection. The seller usually gives warranties about the company, supported by a disclosure letter identifying exceptions to those statements. Specific risks are dealt with through indemnities, which provide an agreed payment mechanism for defined liabilities. Negotiated limits include financial caps, time limits, minimum claim thresholds and exclusions for matters fairly disclosed.
The SPA distinguishes between signing and completion where conditions must be satisfied first. Conditions can include regulatory consent, lender approval, third-party consent, shareholder approval or the reorganisation of the target’s affairs. Completion provisions list the documents and actions required to close the transaction, such as transferring share certificates, paying the consideration, resigning and appointing directors, releasing security and updating statutory registers. The parties also need to check the company’s articles of association and any shareholder agreement for transfer restrictions or pre-emption rights.
Post-completion clauses cover obligations that continue after the sale. These can include confidentiality, restrictive covenants, transitional services, tax cooperation, retention of records and the process for bringing warranty or indemnity claims. A buyer should also plan the practical steps after completion, including Companies House filings, changes to banking mandates, integration of employees and contracts, and preservation of important records. The SPA works alongside the disclosure letter, board resolutions, stock transfer forms and other transaction documents, so consistency across the document set is essential.