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A share purchase agreement (SPA) is the principal transaction document for the sale and purchase of the entire issued share capital (or a controlling stake) of a private limited company, used for arm's-length transactions where the buyer needs contractual protection against undisclosed liabilities in the target company. It is a materially more detailed document than a simple share transfer agreement: where that shorter template suits a low-risk transfer with minimal warranties, this SPA is designed for genuine M&A transactions with meaningful warranty and indemnity protection, typically negotiated with legal advisers on both sides. When to use it: for the sale of a private limited company (or a business carried on through one) where the buyer wants assurance about the company's financial position, contracts, litigation, employees, tax history, and compliance — matters a simple transfer agreement does not address at all. Structure: an SPA typically comprises (1) the sale and purchase provisions themselves (shares being sold, consideration, and how it is calculated — a fixed price, a completion accounts mechanism, or an earn-out tied to future performance); (2) conditions to completion (if any regulatory or third-party consents are needed); (3) warranties — a comprehensive set of statements about the company given by the seller, covering matters such as accounts, title to shares, material contracts, litigation, employees, pensions, tax, intellectual property, and compliance with law; (4) a disclosure letter, delivered alongside the SPA, in which the seller discloses specific facts against the warranties — anything properly disclosed cannot later be the basis of a warranty claim, which is why disclosure letter drafting is such a critical, heavily negotiated part of the process; (5) indemnities for specific known or quantifiable risks (e.g. a particular tax exposure or litigation matter) which, unlike warranties, do not require the buyer to prove loss flowing from a breach in the same way — an indemnity is a promise to make good a defined loss pound-for-pound; (6) limitations on the seller's liability (time limits for claims, financial caps, a de minimis threshold per claim, and an aggregate threshold before claims can be brought); and (7) restrictive covenants preventing the seller from competing with, or soliciting employees or customers of, the target business post-completion. Warranties vs indemnities — why the distinction matters: a warranty claim requires the buyer to show breach and quantify loss (subject to normal contractual damages principles, including mitigation), whereas an indemnity is a direct promise to reimburse a specified loss, generally easier and more certain for the buyer to enforce for the specific risk it covers, which is why buyers often negotiate indemnities for known, quantifiable exposures uncovered in due diligence, and rely on the broader warranty package for general assurance about matters not specifically investigated. Common pitfalls: relying on warranties alone without seeking specific indemnities for known risks identified in due diligence; a disclosure letter that is too generic to properly qualify the warranties (a 'general disclosure' of, say, the data room is much weaker protection for the seller than specific, cross-referenced disclosures); no clear mechanism for adjusting the price for the target's actual financial position at completion (completion accounts, or a locked-box mechanism with appropriate leakage protections); and liability caps or time limits set without regard to the specific risk profile of the transaction (e.g. tax warranties often warrant a longer limitation period than general commercial warranties, tracking HMRC's own assessment time limits).
Target company name
Target company registration number
Seller's name or company name
Seller's address
Buyer's name or company name
Buyer's address
Description of shares being sold (class, number, percentage of issued capital)
Consideration structure (fixed price, completion accounts, or earn-out)
Conditions to completion (if any)
Summary of warranty categories given
E.g. accounts, title, material contracts, litigation, employees, pensions, tax, IP, compliance.
Reference to the disclosure letter delivered alongside this agreement
Specific indemnities (for known/quantified risks, if any)
Cap on the Seller's aggregate liability for warranty/indemnity claims
Time limit for general warranty claims
Time limit for tax warranty/indemnity claims
Often longer than general claims, tracking HMRC assessment time limits.
De minimis threshold per claim and aggregate basket before claims can be brought
Post-completion restrictive covenants on the Seller (non-compete, non-solicit)
Completion date
Date of signature
E.g. accounts, title, material contracts, litigation, employees, pensions, tax, IP, compliance.
Often longer than general claims, tracking HMRC assessment time limits.