Glossary
Share purchase agreement
The binding legal contract that documents the sale of shares in a company: what is sold, the price and how it is paid, the conditions, the warranties and indemnities, and the obligations of each side.
In plain English
Once due diligence is complete, the terms agreed in heads of terms are turned into the share purchase agreement, usually shortened to SPA. It is the document both sides sign, and it governs everything that happens afterwards, including claims, earnouts and restrictive covenants.
Alongside it sit the disclosure letter, in which the seller qualifies the warranties, and any tax covenant, escrow agreement and service agreements for founders staying on.
Why it matters
The SPA is where the commercial deal becomes legally binding. Points left open earlier are resolved here, often under time pressure, which is why settling the important commercial terms in heads of terms matters.
What to watch for
- Instruct experienced M&A lawyers early.
- Read the warranties and the disclosure process with care.
- Understand the interaction between price mechanics, retentions and claims.
Transaction language and legal treatment depend on the agreement and the jurisdiction. Written by Motion Advisory Partners as general guidance, not legal advice.