Share Purchase Agreement (SPA)
The definitive legal contract governing the sale and purchase of shares in a company.
Full Definition
A Share Purchase Agreement (SPA) is the principal legal document governing the sale and purchase of shares in a target company. It sets out all terms and conditions of the transaction.
Key SPA sections: 1. Definitions and interpretation 2. Sale and purchase of shares 3. Consideration and payment 4. Conditions precedent 5. Pre-completion undertakings 6. Completion mechanics 7. Warranties 8. Limitations on claims 9. Indemnities 10. Restrictive covenants 11. Confidentiality 12. General provisions
Supporting documents:
- Disclosure letter
- Tax deed
- Completion board minutes
- Share transfers
- Resignation letters
- Service agreements
Negotiation dynamics:
- Seller's lawyers typically produce first draft
- Multiple rounds of negotiation
- Warranty and indemnity scope heavily negotiated
- Limitation provisions (caps, time limits, de minimis)
UK-specific features:
- Stamp duty (0.5% on share purchases)
- Tax deed covering pre-completion tax
- TUPE consultation if applicable
- Companies Act compliance
The SPA is typically the most heavily negotiated document and reflects the commercial deal reached between the parties.
Related Terms
Warranties
Contractual statements by the seller about the business, breach of which may entitle the buyer to damages.
Indemnities
Contractual promises to compensate the buyer pound-for-pound for specific identified losses or liabilities.
Disclosure Letter
A letter from the seller disclosing matters that qualify the warranties given in the sale agreement.
Completion
The legal transfer of ownership when all conditions are satisfied and the transaction formally closes.