Share Purchase Agreement (SPA) UK: What to Include and How to Sign It

A share purchase agreement is a legally binding contract between the seller, who owns shares in a private limited company, and the buyer, who wants to acquire them. The buying party may be an individual, a corporate group, a management team or an investor, and it may acquire all of the shares in the target or a controlling stake.

Under UK law, the defining feature of a share sale is that the target company itself does not change. It keeps its assets, commercial contracts, employees, property, bank accounts and history. Only the shareholders change, so the buyer indirectly takes on everything the target company has done in the past. That is why the SPA focuses so heavily on warranties, indemnities and disclosure information.

The SPA is rarely the only transaction document. It typically sits alongside a disclosure letter, a tax deed, service agreements for a seller who stays on in the business, and any financial documents used to fund the transaction.

The alternative to buying shares is buying the business assets directly through an asset purchase agreement. The right structure for the parties depends on how liabilities are allocated, the tax treatment of the transaction and how easily commercial contracts, property and other assets can be transferred.

A seller typically prefers a share sale because the proceeds are received directly and the liabilities stay with the company. Buyers often prefer an asset purchase because they can select which assets and liabilities they take on. The SPA is where that tension between the parties gets resolved — mostly through the allocation of risk and representations, warranties and covenants.

Every SPA is negotiated, but most UK agreements include the same recognisable structure. Each clause gives one party a specific legal protection under contract law.

The SPA identifies each party, the target company and the exact number and class of shares in the sale. It then sets out the consideration — the purchase price and how it will be paid. Typical structures include:

• Cash at completion. The full price, or most of it, paid on the day the transaction closes.
• Deferred consideration. Part of the price paid to the seller in instalments after completion.
• Earn-out. Extra payments linked to the target business hitting agreed financial targets. An earn-out can bridge a valuation gap, but earn-out terms are a common source of post-completion disputes.
• Consideration shares or loan notes. The seller takes shares in the acquiring business or a debt instrument instead of cash.

A seller needs specific legal advice before agreeing to any deferred payment structure.

The parties need a mechanism to ensure the purchase price reflects the target company's financial position on the day of the transaction. Two approaches are standard in UK practice.

Under a locked box mechanism, the price is fixed by reference to an earlier set of accounts, and the seller warrants that no value has leaked out of the target since that date. Under completion accounts, the price is adjusted once accounts are drawn up showing the actual cash, debt and working capital at completion.

A locked box gives certainty and suits a target business with reliable financial information. Completion accounts offer the buying party more protection but take longer and can lead to disputes between the parties over the figures.

Warranties are statements of fact about the target company, covering its accounts, tax, commercial contracts, employees, property, intellectual property, data protection and litigation. If a warranty proves untrue and the buyer suffers loss, it can bring a legal claim for damages. The seller qualifies its warranties through a disclosure letter and supporting documents that list known exceptions.

Indemnities are promises to reimburse the buying party pound for pound if a specific liability arises, whether or not the value of the business has fallen. They are used for risks identified during due diligence, such as an ongoing legal dispute. Most agreements also contain a tax covenant, which works like an indemnity for pre-completion tax liabilities.

The seller limits its exposure through financial caps, a minimum threshold for individual claims, an aggregate threshold before any claim can be brought, and time limits on warranty claims. Buyers sometimes bridge the gap with warranty and indemnity (W&I) insurance, which transfers some risk to an insurer — though policies typically exclude matters already known to the parties at signing.

The SPA will also contain restrictive covenants preventing sellers from competing with the target business, soliciting its customers or poaching staff after the sale. Because the buyer is paying for the goodwill of the business, these covenants are more readily enforced than those in employment contracts.

Other standard terms cover conditions to completion, confidentiality and governing law. Where signing and completion are split, conditions might involve regulatory clearance or a key customer's consent, and the seller gives covenants not to pay dividends, take on debt or change key contracts in the meantime.

A typical UK share purchase follows a clear sequence, though the timetable depends on the size of the target company, the type of business and how much due diligence each party needs.

The buyer's corporate law firm typically prepares the first draft of the SPA, because that party carries the greater risk. The selling party's solicitors then review it and negotiate. Both sides should focus on the same five pressure points:

• Match the due diligence. Warranties and indemnities must reflect the specific risks the investigation uncovered.
• Define financial terms precisely. Spell out how completion accounts, leakage and any earn-out are calculated and resolved.
• Check corporate approvals. Review the target company's articles of association and any shareholders' agreement for pre-emption rights or required consents.
• Look for change of control terms. Key commercial agreements or property leases may allow the counterparty to terminate following the sale.
• Agree the disclosure process early. Late or incomplete disclosure is one of the most common causes of transaction delays.

Where a buyer acquires a minority stake alongside existing shareholders, the SPA typically sits next to a new or amended shareholders' agreement. Our article on updating a shareholder agreement after a funding round covers the points to revisit.

Templates can help you understand the typical structure of an SPA and prepare for negotiations. However, a template cannot reflect the target company's specific issues, the agreed purchase price or the commercial deal the parties have reached. For anything beyond a straightforward transfer between existing shareholders, you need solicitors with corporate law experience to protect each party's position.

Completion is the moment legal ownership of the shares in the company passes to the buyer. The parties exchange a defined set of completion documents simultaneously.

After completion, the target company must update its register of members and its register of people with significant control (PSC), and notify Companies House of any director changes. The buyer must also deal with Stamp Duty. When shares are acquired using a stock transfer form, the buyer pays tax at 0.5% of the consideration if the price exceeds £1,000. Under HMRC guidance on Stamp Duty on shares, the duty is rounded up to the nearest £5 and must be paid within 30 days of the form being signed and dated. HMRC confirms it accepts electronically signed stock transfer forms submitted by email.

Yes. Under the law of England and Wales, an SPA can validly be signed with an electronic signature. Electronic signatures are admissible as evidence under the Electronic Communications Act 2000, and the Law Commission confirmed in its September 2019 report that an electronic signature can meet a legal requirement for a signature where the signatory intends to authenticate the document.

A few points require attention before choosing a signature method:

• Deeds. Legal documents executed as deeds — such as some powers of attorney — still require a witness who is physically present at signing.
• Stock transfer forms. HMRC accepts electronically signed stock transfer forms submitted for Stamp Duty.
• Signature level. High-value transactions often use an advanced electronic signature (AES) or a qualified electronic signature (QES) for a stronger legal audit trail.
• Final versions. All parties must sign the same agreed version of the SPA — an e-signature platform handles version control automatically.

Our comparison of QES and AES for high-value contracts explains which level is right for your transaction.

A share purchase agreement does far more than record a purchase price. It decides who bears the risk of the company's past, what the seller legally promises and what conditions must be satisfied before ownership transfers. Invest in thorough due diligence, take legal advice before agreeing heads of terms and plan completion logistics — including Stamp Duty — well in advance of signing day.

When the transaction is ready to close, the signing process should not hold it up. Youtrust lets every party — buyers, sellers and their advisers — sign the SPA and all completion documents securely from any device, with a legally valid audit trail.