Private Share Purchase Agreement: What It Covers and the Terms That Protect You

Posted on: 5 October 2026

If you are buying or selling shares in a private UK company, whether that is a full exit, bringing in a new investor, or a management buyout, the share purchase agreement is the document that makes the deal happen. This guide explains what a private share purchase agreement covers, the key clauses that protect buyer and seller, and where the process most often goes wrong.

What Is a Share Purchase Agreement?

A share purchase agreement, usually shortened to SPA, is the contract that records the terms on which shares in a company change hands. It identifies the shares being sold, the price and how it is paid, the conditions that need to be met before completion, and the protections each side has if something turns out to be wrong with the company after the deal completes. Unlike an asset sale, where a buyer purchases specific assets of a business, a share purchase means the buyer takes over the company itself, including its existing contracts, liabilities and history, known and unknown.

The Clauses That Actually Matter

Consideration and Payment Structure:

how the price is calculated and paid, whether as a lump sum, in instalments, or with an earn out tied to future performance, and what happens if the figures used to calculate it turn out to be wrong.

Warranties:

Statements the seller makes about the company’s financial position, contracts, employees and compliance, giving the buyer a claim if any of them turn out to be untrue.

Indemnities:

Specific promises to cover a named risk pound for pound, used where a particular issue, such as an ongoing dispute or tax exposure, has already been identified during due diligence.

Disclosure Letter:

The seller’s opportunity to qualify the warranties by disclosing known issues, which limits what the buyer can later claim against.

Restrictive Covenants:

Provisions preventing the seller competing with the business or poaching staff and clients for a set period after the sale, protecting the value the buyer has just paid for.

Completion Mechanics:

What happens on completion day, including payment, handover of documents and any conditions that need to be satisfied first.

Why Default UK Law Favours the Seller

Without specific protections built into the agreement, UK law generally favours the position of caveat emptor, buyer beware, meaning the buyer has little automatic recourse if a problem with the company only emerges after completion. This is why warranties, indemnities and a properly negotiated disclosure letter matter so much in practice, since they are what shifts risk back toward the seller rather than leaving the buyer to simply accept whatever they find.

Share Sale or Asset Sale?

Buyers and sellers do not always agree on this point, and the choice affects far more than just the paperwork. A share sale transfers the whole company, including historic liabilities, which is often simpler for the seller and can be more tax efficient, but leaves the buyer taking on unknown risk. An asset sale lets the buyer choose specific assets and leave unwanted liabilities behind, which buyers often prefer for exactly that reason, though it can be less attractive to sellers and more complex where contracts need to be transferred individually.

If you are buying or selling shares in a private company and need the SPA drafted, reviewed or negotiated, our solicitors can help on a fixed fee basis.

How MAR Legal Can Help

Our solicitors advise buyers and sellers on private share purchase agreements, from drafting the initial terms through to negotiating warranties, indemnities and the disclosure letter, and supporting completion. We advise across Manchester and the UK on deals ranging from a straightforward two-party sale to more complex arrangements involving multiple sellers or an earn out.

To discuss your agreement get in touch today:

Contact Us info@marlegal.co.uk

Final Thought

A share purchase agreement is not just a formality once a price has been agreed. It is where the actual risk of the deal gets allocated, and a well negotiated agreement can be the difference between a clean exit and a dispute that surfaces months after completion. Getting proper advice on the warranties, indemnities and disclosure process before signing protects both sides, not just the party that insisted on it.

Private Share Purchase Agreement FAQs

A warranty is a statement of fact about the company that, if untrue, gives the buyer a claim for breach of contract, which typically requires the buyer to show they suffered a loss as a result. An indemnity is a specific promise to cover a named risk pound for pound, regardless of whether it technically amounts to a breach, and is usually used where a particular issue has already been identified and both sides agree who should bear that specific cost.

A disclosure letter is where the seller discloses known issues that qualify the warranties given in the agreement, effectively saying the warranty is true except for what is set out here. A well-prepared disclosure letter protects the seller from a warranty claim over something the buyer was already told about, which is why sellers should take the disclosure process seriously rather than treating it as a formality.

An earn out ties part of the purchase price to the company’s future performance after completion, typically used to bridge a gap between what the seller believes the business is worth and what the buyer is willing to pay upfront. Earn outs need careful drafting around how performance is measured and who controls the business during the earn out period, since disputes over earn out calculations are a common source of post completion disagreement.

Generally, once signed and unconditional, an SPA is binding and cannot simply be walked away from. Where the agreement is signed but completion is conditional on something happening first, such as regulatory approval, either party may have a right to terminate if the condition is not satisfied within an agreed timeframe. This is why conditions precedent need to be drafted carefully, setting out exactly what happens if they are not met.

A straightforward deal between parties who already agree on the key commercial terms can complete within a matter of weeks once due diligence and drafting are underway. More complex deals, particularly those involving multiple sellers, third party consents, or regulatory approvals such as under the National Security and Investment Act, can take significantly longer, so it is worth building realistic timeframes into any heads of terms agreed at the outset.

Yes. Due diligence exists to identify risks that even a trustworthy seller may not be aware of themselves, such as an unresolved contractual issue, a compliance gap, or a liability that has not yet surfaced. Skipping due diligence because the relationship feels straightforward is one of the most common reasons buyers end up relying on a warranty claim after completion, which is a far more difficult and costly route than catching the issue beforehand.

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