Share purchase agreement template

A Share Purchase Agreement (SPA) is the legally binding contract for the sale and purchase of shares in a company.  It sets out the key terms of the deal. These include the price, including how and when it will be paid, what shares are being sold and the obligations of each party.  It also allocates risk regarding the assets and liabilities of the target company as between the buyer and the seller in the form of indemnities and warranties.

An SPA is used in private company transactions across England and Wales. It is a core document in most M&A deals.

The first draft is usually prepared by the buyer’s solicitors and will invariably be more buyer-friendly at the outset.

In more limited cases, such as auctions with multiple bidders or in distressed sales, the seller’s solicitors might prepare the first draft.

The parties and their advisers will then review and negotiate the terms. The SPA will go through several rounds of amendments before it is agreed.

A Share Purchase Agreement will usually include:

• details of the shares being sold
• the purchase price and payment terms
• conditions to completion (if any)
• warranties given by the seller
• limitations on the seller’s liability
• indemnities (where specific risks are identified)
• completion mechanics
• restrictive covenants 
• (such as non-compete clauses)

Yes, a Share Purchase Agreement is legally binding once it has been signed by the parties.

Some provisions may take effect on signing. Others may take effect on completion, depending on how the deal is structured.

It is important that both parties fully understand the terms before signing, as the SPA will govern their legal rights and obligations.

Warranties are contractual promises given by the seller in the SPA about the company being sold.

They cover areas such as:

• ownership of shares
• financial position and performance
• contracts
• employees
• assets and liabilities, including IP and real estate
• tax
• litigation and compliance with laws

If a warranty proves to be untrue, the buyer may have a claim against the seller for damages for the loss which the buyer has suffered.  The buyer’s claim will be subject to contractual limitations in the SPA relating to potential warranty claims, including financial and time limitations and exclusions for matters which have been disclosed in the disclosure letter which will accompany the SPA.

In most cases, a Share Purchase Agreement which is governed by English law does not need to be witnessed.

An SPA is usually executed as a simple contract. This means it only requires the signatures of the parties.

However, if the SPA is executed as a deed, then witnessing requirements will apply.  An SPA may be executed as a deed where it contains a post-closing power of attorney in relation to the shares being sold.  Parties may also prefer a deed to extend limitation periods and to support the enforceability of provisions such as restrictive covenants, by avoiding any argument about lack of consideration.