Share purchase agreement (SPA)
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.
Why it matters
The SPA allocates risk between buyer and seller; its warranties, price adjustments and conditions can be worth as much as the headline price.
How it is used in transactions
Negotiated in the final stage of sell-side and buy-side M&A transactions.
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What is a share purchase agreement?
A share purchase agreement, commonly called an SPA, is the principal contract under which a buyer agrees to purchase shares in a company from one or more sellers. It records the parties, sale shares, consideration, price mechanism, conditions, representations and warranties, covenants, agreed protections, completion mechanics, termination rights, governing law and other negotiated terms.
The SPA sits at the legal centre of a share acquisition. The commercial model, diligence findings, financing plan and completion process should reconcile to the same definitions, transaction perimeter and funds flow. Qualified transaction counsel should draft and advise on the document and its legal effect.
What a share purchase agreement needs to resolve
| SPA area | Commercial question | Evidence interface |
|---|---|---|
| Parties and sale shares | Who sells, who buys and which shares or interests transfer? | Entity chart, ownership records, authorities and transaction perimeter. |
| Consideration | What is paid, when, in which form and subject to which adjustment? | Enterprise-to-equity bridge, sources and uses, payment schedule and funding evidence. |
| Price mechanism | Is equity value fixed by a locked box or adjusted through completion accounts or another agreed mechanism? | Reference balance sheet, definitions of cash, debt and working capital, leakage rules and accounting policies. |
| Conditions precedent | Which approvals, consents, financing and actions must occur before completion? | Conditions tracker, owner, evidence and long-stop date. |
| Representations and warranties | Which statements support the buyer's agreed risk allocation? | Diligence findings, disclosure materials and specialist advice. |
| Covenants | How must the business and parties act between signing and completion, and afterwards where agreed? | Operating limits, access, cooperation and post-completion obligations. |
| Indemnities and limitations | Which identified risks receive specific protection and within which negotiated limits? | Risk register, diligence evidence, financial exposure and legal advice. |
| Completion mechanics | What documents, payments, releases and filings occur at completion? | Funds flow, deliverables list, signatory matrix and completion agenda. |
| Termination and remedies | What happens if conditions fail, obligations are breached or the long-stop date passes? | Scenario analysis, funding and approval dependencies, and legal drafting. |
| Governing law and dispute process | Which law and dispute forum apply? | Qualified legal advice and enforceability analysis. |
Completion accounts, locked box and contingent consideration
The agreed mechanism affects when equity value becomes final, which accounts are prepared and how post-signing value movements are treated.
| Mechanism | How the price is established | Transaction work required |
|---|---|---|
| Completion accounts | An initial price is adjusted after completion using accounts prepared at or by reference to completion under agreed definitions and policies. | Negotiate definitions, policies, preparation and review process, dispute route and worked examples. |
| Locked box | The equity price is based on a historical balance sheet; value leakage between the locked-box date and completion is controlled by agreed provisions. | Validate the reference accounts, permitted leakage, value accrual if any, warranties and claims process. |
| Earn-out or contingent consideration | Part of the consideration depends on future performance or another defined event. | Define metric, period, accounting policy, operating conduct, information rights, calculation and dispute process. |
| Deferred consideration | A fixed or determinable amount is paid after completion. | Assess timing, security, set-off, conditions, credit exposure and funding treatment. |
Reference: ICAEW completion-mechanisms guidance. Transaction-specific accounting, tax and legal advice is required.
What does an investment banker or M&A adviser do around the SPA?
The corporate-finance adviser owns the commercial model and negotiation evidence; transaction counsel owns legal drafting and legal advice.
| Workstream | Corporate-finance or M&A adviser | Transaction counsel |
|---|---|---|
| Commercial agreement | Models value, structure, financing and economic trade-offs; maintains the term comparison. | Translates the agreed position into legal drafting and advises on legal effect. |
| Price mechanism | Builds the enterprise-to-equity bridge, sensitivities and worked examples. | Drafts definitions, procedure, protections, claims and dispute provisions. |
| Diligence findings | Connects findings to value, structure, conditions, financing and negotiation priorities. | Advises on legal risk allocation, disclosure and transaction documents. |
| Conditions and completion | Maintains the integrated decision, financing and closing plan. | Controls legal deliverables, execution, filings and completion mechanics. |
FAQ
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 SPA, or share purchase agreement, is the binding legal contract that governs the sale of a company’s shares from seller to buyer. It sets out the purchase price and payment mechanics, the conditions that must be satisfied before completion, the warranties and indemnities the seller gives about the business, and the remedies if those statements prove untrue. The SPA is negotiated after due diligence, signed at exchange, and completed once its conditions are met.
A share purchase agreement typically covers: the parties and the shares being sold; the price and any adjustment mechanism (such as completion accounts or a locked-box); conditions to completion; seller warranties on accounts, contracts, tax, litigation and compliance; indemnities for specific known risks; restrictive covenants; and the remedies and limitations on the seller’s liability. These terms allocate risk between buyer and seller and can be worth as much as the headline price.
In an M&A or investment banking process the SPA is the definitive agreement that closes the deal. After the adviser has run the sale, agreed a price and completed diligence, the SPA converts the commercial deal into a binding contract. A corporate finance adviser works alongside legal counsel to negotiate the commercial terms of the SPA so they protect the client’s value and risk position.
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.
Last updated: August 2026.
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When is a share purchase agreement used in an M&A transaction?
The SPA is negotiated after the principal commercial terms and due-diligence findings are sufficiently developed. It records the shares being sold, price and adjustment mechanics, conditions to completion, warranties, indemnities, covenants, limitations and remedies. Legal advisers draft and negotiate the agreement; the corporate-finance adviser aligns its economics with the agreed transaction.
