What is the purpose of a share purchase agreement?

A share purchase agreement regulates the transfer of shares in a company and sets out the parties’ rights and obligations. It typically covers matters such as price, completion, warranties, indemnities and liability allocation.

When do you need a share purchase agreement?

It is used whenever shares in a company are sold, whether the deal concerns the whole company or a minority stake. It becomes especially important where significant value is involved or multiple parties are participating.

How does a share purchase agreement differ from a shareholders’ agreement?

A share purchase agreement governs the sale and transfer of shares, while a shareholders’ agreement regulates the owners’ ongoing rights and obligations in the company. In practice, the first is transaction-focused and the second governs long-term cooperation.

Share purchase agreement

Read more about a share purchase agreement regulating the transfer of shares in a limited company.

Glossary
Share purchase agreement

Explained – what is a share purchase agreement?

A share purchase agreement is a written contract that sets the terms on which one or more shares change ownership. It is commonly used in connection with company acquisitions, investments or when a shareholder chooses to sell their stake. An agreement lawyer plays a central role in drafting the contract with clarity and precision to ensure all relevant provisions are covered. Typical elements include the purchase price, the completion date, warranties and the allocation of liability between the parties, together with any indemnities.

When does a share purchase agreement become relevant?

A share purchase agreement is required whenever shares in a company are sold, whether this concerns a small parcel of shares or the entire company. It is particularly important for transactions involving significant value or multiple parties. For example, on a company sale, a generational transfer or an external investment, parties usually agree a transaction agreement to clarify rights and obligations and to support transaction transparency.

Illustration of two business professionals shaking hands over a signed document, representing a share purchase agreement (SPA), corporate transaction, M&A deal completion, and contractual approval.

Key considerations for a share purchase agreement

There are several important aspects parties should address when preparing a share transfer agreement.

Set out the purchase price and the payment terms clause clearly.
Ensure the warranties clause, seller warranties and the allocation of liability (including any limitations of liability) are expressly stated.
Define how disputes will be resolved, for example by a dispute resolution clause with an arbitration clause.
Specify the completion date and the conditions for completion.
Clarify any conditions precedent to completion, for example regulatory approvals.
Include appropriate restrictive covenants, such as a non-compete, for the seller.
List the closing documents to be delivered on completion.

A clear, well-structured contract makes it easier for the parties to understand and follow the agreement in full, supporting predictable execution and contract negotiation.

share purchase agreement

Why is a share purchase agreement important?

A share purchase agreement matters because it sets the conditions for the transfer of shares and protects both buyer and seller. Without a contract, the parties face uncertainty over the terms governing the sale of shares in a company.

The agreement promotes stability and transparency in the deal. When core matters such as price, risk allocation, warranties and indemnities are documented, the scope for ambiguity and future disputes is reduced.

More broadly, a well-drafted share sale agreement strengthens trust between the parties—especially where future collaboration or continued involvement in the company is envisaged. A concise governing law clause also helps manage cross-border expectations.

Its purpose is to regulate the transfer of shares in a company and create clarity between the parties.

It is needed on any sale of shares—whether for the whole company or a minority stake—and becomes especially important where material value is involved or multiple owners are participating.

A share purchase agreement governs the sale and transfer of shares in a company, whereas a shareholders’ agreement regulates the ongoing rights and obligations between the owners. In summary:

Share purchase agreement: used for the purchase or sale of shares.
Shareholders’ agreement: used to govern the owners’ cooperation and influence.

The parties risk disputes over the purchase price, responsibility for liabilities or the conditions for the transfer. A contract provides legal certainty for both sides and reduces uncertainty.

The agreement is often prepared by a lawyer experienced in company law and contract drafting. The parties contribute commercial content and priorities, but legal expertise ensures the document is accurate and tailored to the situation.

The lawyer drafts the contract to reflect applicable law and practice.
Seller and buyer review the terms and negotiate, including any indemnities.
The agreement is signed and becomes binding once both parties have approved it.

These agreements are typically detailed and include provisions on price, warranties and liability allocation. They usually comprise:

Background and purpose of the sale of shares in a company.
Terms for the purchase price and a payment terms clause.
Seller warranties about the company’s position and a warranties clause.
Allocation of liability between buyer and seller, including any limitations of liability.
A dispute resolution clause (often with an arbitration clause) and a governing law clause.
Practical arrangements for completion and the closing documents for the transfer of shares in a company.

The agreement therefore clarifies the parties’ deal and provides predictability for both sides, whether the transaction is a standalone share transfer agreement or part of a broader company acquisition agreement or company sale agreement.