Share Purchase Agreement

Share Purchase Agreement: Buy or Sell Shares With Confidence

A share purchase agreement (SPA) sets out the terms on which a seller sells shares in a private company to a buyer. It covers the shares being sold, the price and how it is paid, completion, the promises the seller makes about the company and how far the seller is liable if those promises turn out to be untrue. Robot Lawyer drafts the agreement from your answers, for the law of the country or state you choose. On the Verified plan, a legal professional checks it before you sign.

CONTENTS

What Is a Share Purchase Agreement?

When you buy shares in a company, you buy the company as it is, with all its assets, contracts, debts and history. That is the key difference from an asset purchase, where the buyer picks the assets it wants. Because the buyer takes on everything, the share purchase agreement is where it protects itself, mainly through warranties (promises about the company) and indemnities (promises to pay for specific risks).

The seller, in turn, uses the agreement to limit its exposure: by disclosing known issues against the warranties, setting time limits for claims and capping its liability.

When Do You Need One?

• Selling a company
  The owners sell all the shares in a private company to a buyer.
• Selling part of a company
  A shareholder sells some or all of their shares to another shareholder or an investor.
• Shareholder exits
  A founder or investor leaves and sells their shares to the remaining shareholders.
• Management buy-outs
  The management team buys the company from its owners.
• Group reorganisations
  Shares in a subsidiary are sold within a group or to a new owner.

What's Included in Your Agreement?

• The parties and the shares
  The seller, the buyer, the company and the class and number of shares.
• Price and payment
  The purchase price, how it is paid and any price adjustment after completion.
• Conditions
  Any approvals or consents needed before completion.
• Completion
  When and where completion takes place, and the documents handed over.
• Warranties
  The seller's promises about the company and the shares.
• Disclosure
  Known matters the seller discloses against the warranties.
• Indemnities
  Any specific risks the seller pays for, such as tax or a known dispute.
• Limits on claims
  Time limits, caps and thresholds on the seller's liability.
• Restrictions
  Non-compete and non-solicitation restrictions on the seller after completion.
• Confidentiality and termination
  Keeping the deal confidential and when the agreement can be ended before completion.

Warranties, Disclosure and Indemnities

• Warranties
  Statements about the company, such as its accounts, contracts, employees, property, tax and disputes. If one is untrue, the buyer may claim for the loss in value of the shares.
• Disclosure
  The seller can protect itself by disclosing known problems against the warranties, usually in a disclosure letter. A buyer can't normally claim for a matter that was fairly disclosed.
• Indemnities
  A promise to pay for a specific loss, pound for pound or dollar for dollar, whether or not it reduces the value of the shares. Indemnities are common for tax and known disputes.
• Limitations
  Time limits, a minimum claim size and an overall cap balance the buyer's protection against the seller's risk.

How It Works on Robot Lawyer

1. Answer the questions
   Tell us about the parties, the company, the shares, the price, completion, warranties, indemnities and restrictions.
2. Generate your agreement
   We draft a complete share purchase agreement with a warranties schedule under the law you choose.
3. Get it verified
   On the Verified plan, a qualified legal professional checks your agreement within 24 hours and makes amendments where needed. See how our documents are verified.
4. Sign and complete
   Sign the agreement, then complete the sale by paying the price and handing over the completion documents.

How It Works in Different Countries

• UK
  In England, Wales and Northern Ireland, shares in a private company are usually transferred using a stock transfer form, and stamp duty is normally payable by the buyer at 0.5% on transfers over £1,000. Scottish companies follow the same company law.
• United States
  Shares are transferred under state corporate law and the company's governing documents, and the sale may need to comply with securities laws. Many US deals are documented as a stock purchase agreement.
• Ireland
  Shares are transferred using a stock transfer form, and stamp duty is usually payable by the buyer.
• Canada and Australia
  Share transfers follow the company's constitution or articles and the relevant corporations law, and tax rules on the sale can be significant.

These notes are general. Take tax advice before buying or selling shares.

Share Purchase Agreement FAQs

What's the difference between a share purchase and an asset purchase?

In a share purchase, the buyer acquires the company itself, with all its assets and liabilities. In an asset purchase, the buyer chooses specific assets and usually leaves the liabilities with the seller.

What are warranties in a share purchase agreement?

They are promises by the seller about the company and the shares. If a warranty is untrue, the buyer may be able to claim compensation, subject to any disclosures and limits in the agreement.

Should the seller's liability be limited?

Usually, yes. Sellers commonly limit claims by time (for example, two years for general warranties and longer for tax), set a minimum claim size and cap their total liability, often at the purchase price.

Do I need due diligence?

For most purchases, yes. Due diligence means investigating the company's finances, contracts and legal position before you buy, and it shapes the warranties and indemnities you ask for.

What happens at completion?

The buyer pays the price, the seller hands over the signed transfer documents, share certificates and other agreed items, and the buyer is registered as the new owner of the shares.

Can I use this agreement outside the UK?

Yes. Your agreement is drafted under the law of the country or state you choose. Our lawyers are qualified in England and Wales and check documents for good practice, clear formatting and the law of England and Wales. They are not qualified in other countries' law, so if your agreement is governed by another country's law, we recommend having a local lawyer check it too.

Create a Share Purchase Agreement

Set clear terms for buying or selling shares. You can start with a 7-day free trial. See our pricing for the plans. Related documents: Asset Purchase Agreement, Stock Purchase Agreement, Shareholder Agreement and Deed of Adherence.