A share purchase agreement (SPA) is the document that determines whether a deal protects you or exposes you. Get it wrong, and you inherit liabilities, disputes, and losses that could…
A share purchase agreement (SPA) is the document that determines whether a deal protects you or exposes you. Get it wrong, and you inherit liabilities, disputes, and losses that could have been contracted out at the drafting stage. Knowing exactly what to include in a share purchase agreement is therefore not a matter of legal housekeeping - it is central to commercial risk allocation between buyer and seller.
At a minimum, a well-constructed SPA sets out the parties, the shares being sold, the purchase price and payment mechanics, conditions precedent, warranties and indemnities, restrictive covenants, tax provisions, and completion obligations. Each clause carries weight. Warranties shift risk. Indemnities recover loss pound-for-pound. Conditions precedent control when - and whether - the deal actually completes.
The strongest agreements are drafted with the specific transaction in mind, not lifted from templates. Precision in the drafting stage is what separates a clean exit from years of post-completion litigation.
What Is what to include in a share purchase agreement?
A share purchase agreement (SPA) is the binding contract that governs the sale and transfer of shares from a seller to a buyer. Knowing what to include in a share purchase agreement is the difference between a clean deal and years of post-completion litigation. At its core, the SPA defines who is selling, who is buying, what shares are changing hands, at what price, and on what terms.
The scope extends well beyond the headline numbers. A properly drafted SPA sets out the mechanics of completion, the conditions that must be satisfied before the deal closes, the warranties and indemnities the seller stands behind, and the restrictions placed on both parties after the transaction completes. It allocates risk, defines liability caps, and establishes the remedies available if something goes wrong.
Context matters. An SPA for a small owner-managed business will look markedly different from one governing the acquisition of a subsidiary within a multinational group. Private company deals typically require far more extensive warranties and disclosure than public transactions, where statutory protections and regulatory oversight fill some of the gaps. Cross-border deals introduce tax, currency, and jurisdictional layers that must be addressed head-on.
Fundamentally, the SPA is a commercial document dressed in legal language. Every clause reflects a negotiated position on risk, value, and control. Getting the contents right means anticipating what could go wrong, pricing that risk accurately, and drafting terms that hold up when tested. Omissions cost money.
Key Benefits of what to include in a share purchase agreement
A well-drafted share purchase agreement (SPA) is the commercial backbone of any equity transaction. Knowing what to include in a share purchase agreement is not a matter of legal box-ticking - it directly shapes risk allocation, deal certainty, and post-completion outcomes. The provisions you build in today determine the disputes you avoid tomorrow.
Clear risk allocation between buyer and seller. Warranties, indemnities, and disclosure schedules force both parties to confront known and unknown liabilities before signing. A buyer gains contractual recourse if the target underperforms against representations; a seller caps exposure through limitations on liability, time bars, and de minimis thresholds. Without these, risk defaults to the party least able to control it.
Price protection and value certainty. Completion accounts mechanisms, locked-box structures, and earn-out provisions ensure the agreed consideration reflects the actual value delivered. Detailed adjustment clauses prevent value leakage between signing and completion - a critical safeguard when working capital, debt, or cash positions shift materially.
Enforceable conditions precedent. Regulatory approvals, third-party consents, and material adverse change clauses give the buyer disciplined exit routes if fundamentals change. For the seller, tightly drafted conditions reduce the risk of a buyer walking away on spurious grounds.
Protection of goodwill and continuity. Restrictive covenants - non-compete, non-solicitation, and confidentiality provisions - preserve the commercial value the buyer is paying for. Absent these, the seller could legitimately erode the acquired business from day one.
Dispute reduction through precision. Clear definitions, tax covenants, and governing law clauses minimise interpretive disputes. Every ambiguity in an SPA is a potential claim; every well-drafted clause is a claim avoided.
In short, a comprehensive SPA converts commercial intent into enforceable rights - protecting economic value, allocating risk deliberately, and giving both parties the certainty required to close with confidence.
How what to include in a share purchase agreement Works
A share purchase agreement (SPA) works by translating a negotiated deal into binding contractual mechanics. Each clause serves a specific commercial function, and the drafting process follows a logical sequence that mirrors how the transaction itself unfolds.
Step 1: Define the parties and the shares. Identify the seller, buyer, and (where relevant) the target company. Specify the exact number, class, and rights of the shares being transferred. Ambiguity here undoes everything that follows.
Step 2: Set the consideration and payment structure. State the purchase price, currency, and how it will be paid - lump sum, deferred, earn-out, or share-for-share. Include mechanisms for completion accounts, locked-box pricing, or working capital adjustments. The valuation logic must be reproducible from the document alone.
Step 3: Draft conditions precedent. These are the hurdles that must be cleared before completion: regulatory approvals, third-party consents, financing, or shareholder resolutions. Each condition needs a longstop date and a clear consequence if unsatisfied.
Step 4: Insert warranties and representations. The seller warrants the state of the business - title to shares, accounts, tax, litigation, contracts, employees, IP, and compliance. Buyers push for breadth; sellers push back with a disclosure letter that qualifies specific warranties. This is where most negotiation time is spent.
Step 5: Build indemnities and limitations. Indemnities cover known or high-risk exposures on a pound-for-pound basis. Limitations cap liability by amount, time, and de minimis thresholds. The interplay here determines real post-completion risk allocation.
Step 6: Address covenants and restrictive undertakings. Interim conduct between signing and completion, non-competes, non-solicits, and confidentiality obligations sit here.
Step 7: Close with boilerplate that bites. Governing law, jurisdiction, notices, entire agreement, and dispute resolution clauses control how the SPA is enforced. Treat them as substantive, not decorative - they decide who wins when things go wrong.
Common Questions About what to include in a share purchase agreement
What are the essential clauses in a share purchase agreement?
At minimum, an SPA must identify the parties, define the shares being transferred, state the purchase price and payment mechanism, set the completion date, and include warranties, indemnities, and governing law. Omit any of these and you invite dispute.
Should warranties and indemnities be separated?
Yes. Warranties address the state of the target company and give rise to damages claims for breach. Indemnities provide pound-for-pound recovery for specific, identified risks - unpaid tax, pending litigation, environmental liabilities. Treating them interchangeably weakens the buyer's position.
How is the purchase price typically structured?
Deals commonly use either a locked-box mechanism (fixed price based on historical accounts) or completion accounts (adjusted post-closing). Earn-outs, deferred consideration, and retention accounts are frequently layered in. The chosen structure should be explicit, with clear calculation methodology.
What restrictive covenants should be included?
Non-compete, non-solicitation, and non-poaching clauses protect the buyer's investment. Duration and geographic scope must be reasonable - typically 12 to 36 months - or courts may refuse to enforce them.
Do I need disclosure letters?
Absolutely. The disclosure letter qualifies the seller's warranties and is central to allocating risk. Without one, sellers face unlimited exposure; buyers lose clarity on what they are actually acquiring.
How are disputes usually handled?
Most SPAs specify jurisdiction, governing law, and often arbitration for confidentiality. Include escalation procedures, notice provisions, and clear timelines for bringing claims - particularly warranty claims, which are typically time-limited.
Conclusion
A share purchase agreement is only as strong as the detail behind it. Knowing what to include in a share purchase agreement - from the parties, consideration and completion mechanics through to warranties, indemnities, restrictive covenants and tax provisions - is what separates a clean deal from a costly dispute months down the line.
The key takeaways are straightforward. Define the commercial terms precisely. Allocate risk deliberately through warranties, disclosure and indemnities. Protect goodwill with tailored restrictions on the seller. And never treat boilerplate as an afterthought; governing law, notices and limitation clauses often decide who wins when things go wrong.
Your next step is practical. Before you sign anything, have the draft reviewed by a corporate solicitor who negotiates SPAs regularly. Pressure-test each clause against your commercial position, not the other side's template. Get that right, and the agreement will do exactly what it should: protect value and deliver certainty.
This sits within our Mergers and Acquisitions guidance.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.