A share purchase agreement is the binding legal contract for the sale of a company’s shares. It sets out the price and payment mechanics, conditions to completion, warranties and indemnities from the seller, and remedies if statements prove untrue. It is negotiated after due diligence and signed at exchange, with completion following once conditions are met.
The SPA allocates risk between buyer and seller; its warranties, price adjustments and conditions can be worth as much as the headline price.
Negotiated in the final stage of sell-side and buy-side M&A transactions.
A share purchase agreement is the binding legal contract for the sale of a company’s shares. It sets out the price and payment mechanics, conditions to completion, warranties and indemnities from the seller, and remedies if statements prove untrue. It is negotiated after due diligence and signed at exchange, with completion following once conditions are met.
Negotiated in the final stage of sell-side and buy-side M&A transactions.
An LOI is a largely non-binding statement of proposed terms issued before due diligence begins in earnest. The SPA is the binding legal contract negotiated after diligence, setting out price and payment mechanics, conditions to completion, warranties, indemnities and remedies. The LOI frames the deal; the SPA commits the parties.
Warranties are statements of fact the seller makes about the company — its accounts, contracts, litigation and tax position — on which the buyer relies. If a warranty proves untrue, the buyer may claim remedies under the SPA. Together with indemnities and price adjustments, warranties allocate risk between buyer and seller.
Speak to a partner about how this applies to your transaction.
