Share Purchase Agreements In the UK: Buying Or Selling Company Shares

Buying or selling shares in a company can be an exciting milestone - whether you’re bringing in a new investor, buying out a co-founder, or selling your business (or part of it) to move on to your next venture.

But this is also one of those moments where “we’ll just agree it over email” can come back to bite you.

In the UK, a properly drafted Share Purchase Agreement (often shortened to “SPA”) is the key legal document that sets out exactly what’s being sold, on what terms, and what happens if something turns out not to be true after completion.

So, what is a share purchase agreement - and what should you look out for as a small business owner?

What Is A Share Purchase Agreement (SPA)?

A Share Purchase Agreement is a contract where one party (the seller) agrees to sell shares in a company to another party (the buyer) on agreed terms.

In simple terms: it’s the document that records the deal when company shares change hands.

This matters because shares aren’t just “a stake” in a business - buying shares often means the buyer is taking on:

• Ownership (full or partial) of the company;
• Control rights (depending on the class of shares and any shareholder arrangements); and
• Exposure to the company’s history, including liabilities that already exist in the company.

That last point is why SPAs usually include detailed legal protections like warranties, indemnities, and disclosure.

It’s also common for the SPA to work alongside other documents that govern how the company runs, such as the Company Constitution and a Shareholders Agreement.

Why An SPA Matters For Small Businesses

In a small business, the shareholders are often also the directors, founders, or key operators. That means a share sale isn’t just a financial transaction - it can change:

• who controls decisions;
• who can appoint/remove directors;
• who gets dividends;
• what happens if a shareholder wants to leave; and
• what the buyer can do if they later discover a problem with the business.

A well-drafted SPA helps prevent misunderstandings by putting the commercial deal into clear legal terms - and it gives both sides a roadmap if something goes wrong.

When Do You Need A Share Purchase Agreement?

You’ll usually want a Share Purchase Agreement whenever there’s a meaningful transfer of shares, especially where money is changing hands and/or the buyer is relying on information you’ve provided about the business.

Common scenarios include:

• Selling your business by selling shares (either 100% of the shares or a majority stake);
• Founder exits where one co-founder buys another out;
• Investor buy-ins where an existing shareholder sells some shares to an investor (note: this is different from issuing new shares);
• Succession planning, such as transferring shares to family members or key staff; and
• Restructures where shares move between holding companies or group entities.

Even in “friendly” deals, having a written SPA is often the difference between a smooth transition and an expensive dispute later.

Do You Always Need An SPA For A Share Transfer?

Not every share transfer is documented by a long-form SPA. Sometimes a simple transfer can be handled with a stock transfer form and supporting board/shareholder resolutions.

However, for most business sales or significant buy-ins, relying on paperwork alone is risky. If you’re doing a formal share sale, you’ll generally want an SPA and a structured process for Share Transfer steps (including approvals, filings, and updating statutory registers).

As always, what’s “enough” depends on the value of the deal, the company’s risk profile, and the relationship between the parties - so it’s worth getting tailored advice.

What Should A Share Purchase Agreement Include?

There’s no one-size-fits-all SPA. A good Share Purchase Agreement reflects the specific business, the risk allocation you’ve negotiated, and the reality of how the company operates.

That said, there are some core terms you’ll usually see.

1. The Parties And The Shares Being Sold

The SPA should clearly identify:

• the seller(s) and buyer(s);
• the company whose shares are being sold; and
• the number and class of shares being transferred.

This is especially important where the company has different share classes (for example, shares with different voting rights or dividend rights).

2. The Price And Payment Mechanics

This section covers:

• the purchase price;
• whether it’s paid in full at completion or in instalments;
• any retention/holdback (money held back to cover potential claims); and
• whether there’s an earn-out (extra payment depending on future performance).

For small business deals, payment terms are often where things can get messy - so it’s worth getting this drafted with real precision.

3. Completion Conditions And The Completion Process

Some deals are “sign and complete” on the same day. Others are conditional (for example, subject to third-party consent, finance approval, or a key contract being novated).

If you need to transfer contracts as part of the deal (for example, a customer agreement is in the seller’s name or needs consent), a Deed of Novation may be part of the wider transaction pack.

The SPA will usually include a completion checklist setting out what must happen at completion, such as:

• delivering signed share transfer forms;
• board minutes approving the transfer;
• updating the company’s registers; and
• resignation/appointment of directors (if relevant).

4. Warranties (And Why Buyers Care About Them)

Warranties are statements of fact about the company and the business. If a warranty turns out to be untrue, the buyer may have a claim.

Typical warranty areas include:

• the company’s accounts and financial position;
• tax compliance (for example, VAT and PAYE filings);
• material contracts and whether they’re valid/enforceable;
• employees and worker arrangements;
• intellectual property ownership;
• ongoing disputes or threatened claims; and
• regulatory compliance (where relevant to the industry).

From a seller’s perspective, warranties can feel stressful - because you’re being asked to “stand behind” what you’re selling. But warranties are also a normal part of allocating risk in a business purchase.

The key is making sure warranties are:

• accurate (or appropriately qualified);
• limited to what you actually know (where possible); and
• matched with a proper disclosure process (more on that below).

5. Disclosure (The Seller’s Safety Valve)

Disclosure is how a seller protects themselves from warranty claims.

In practice, the seller provides a disclosure letter (and a disclosure bundle) setting out exceptions to the warranties - for example:

• an ongoing customer dispute;
• a claim that has been threatened but not filed;
• an equipment lease that includes a restriction;
• a missed Companies House filing that has since been corrected.

If something is properly disclosed, the buyer will usually have a harder time bringing a claim that they were misled about it - but the outcome will depend on the drafting, the disclosure itself, and the circumstances.

This is a big reason SPAs should be tailored - disclosure isn’t just “dump all documents in a folder and hope for the best”. It’s a structured process.

6. Indemnities (Specific Risk Protection)

Indemnities are specific promises to reimburse the buyer for defined losses if a particular issue arises.

Indemnities are often used where a risk is known and measurable, such as:

• an identified tax risk (for example, HMRC queries for a prior period);
• a specific litigation claim; or
• a regulatory breach with potential penalties.

Buyers like indemnities because they’re often easier to claim under than warranties (depending on drafting). Sellers prefer to tightly limit them (by scope, time, and financial caps).

7. Limitations On Claims (Time Limits And Caps)

Most SPAs include limits on how and when claims can be brought, such as:

• time limits for bringing warranty claims (for example, 12–24 months; sometimes longer for tax);
• financial caps (maximum total liability);
• de minimis and basket thresholds (ignoring tiny claims or requiring a minimum total); and
• rules about mitigation and how losses are calculated.

These clauses are where negotiations often get detailed - and they can materially change the risk profile for both sides.

Share Purchase Agreement Vs Asset Purchase: What’s The Difference?

When selling a business, you generally have two broad legal routes:

• Share sale (documented by a Share Purchase Agreement); or
• Asset sale (often documented by a Business Sale Agreement).

In A Share Sale (SPA)

The buyer buys the shares and effectively “steps into” ownership of the company. The company continues to own its assets and remains responsible for its liabilities.

This can be attractive because:

• contracts and licences may stay with the company (subject to change-of-control clauses);
• the business continuity can be simpler; and
• it’s often the cleanest way to transfer the whole company.

But it can also mean the buyer inherits historical risks inside the company - which is why due diligence, warranties and indemnities matter so much.

In An Asset Sale

The buyer purchases selected assets (and sometimes assumes selected liabilities) from the company or owner. This can allow the buyer to “cherry pick” what they want to buy.

Asset sales can be useful where:

• the buyer doesn’t want historical liabilities;
• the business has multiple divisions; or
• only certain assets (like goodwill, IP, and key contracts) are being acquired.

Which structure is best depends on tax, commercial goals, and risk - so it’s worth getting advice early before you agree on heads of terms. (Sprintlaw can help with the legal structuring and documentation, but we don’t provide tax or financial advice.)

A Step-By-Step Guide To Doing A Share Sale The Right Way

If you’re thinking about buying or selling shares, here’s a practical process that works well for many small UK businesses.

1. Agree The Commercial Deal (Before You Draft)

Start by aligning on the key commercial points:

• how many shares are being sold and what that means for control;
• the price and payment timing;
• whether the seller will stay involved after completion (and if so, on what terms);
• any restraints (like non-compete or non-solicit); and
• what happens if something goes wrong.

This is often captured in heads of terms, but remember: the SPA is where the legal certainty comes from.

2. Do Due Diligence (Don’t Skip This)

Due diligence is the buyer’s process of checking what they’re buying. For sellers, it’s also the moment where you’ll want your paperwork in order.

A small business due diligence process often includes reviewing:

• Companies House filings and corporate records;
• accounts, bank statements, and tax filings;
• key customer and supplier contracts;
• employment and contractor arrangements;
• IP ownership (domains, brand names, software, designs); and
• data/privacy practices (especially if you handle customer data).

If you want a structured approach, a Legal Due Diligence Package can help make sure nothing important is missed.

3. Check The Company’s Existing Documents For Restrictions

Before shares can be sold, you usually need to check whether there are restrictions in:

• the Articles of Association (for example, pre-emption rights on transfers); and
• any Shareholders Agreement (for example, consent rights, drag/tag provisions, or valuation mechanisms).

This step is commonly overlooked - and it can derail a deal late in the process if, for example, a minority shareholder has transfer veto rights.

4. Draft And Negotiate The Share Purchase Agreement

This is where the parties work through:

• the warranties and disclosure process;
• any indemnities;
• limits on claims;
• completion mechanics; and
• post-completion obligations.

For many founders, this is the “legal heavy” part - but it’s also where you lock in protection and reduce the chance of disputes later.

5. Complete The Share Transfer And Update Records

Once the SPA completes, you’ll usually need to:

• execute stock transfer forms;
• pay stamp duty (if applicable) and submit forms to HMRC where required;
• update the company’s register of members;
• issue updated share certificates (if used); and
• file any required changes with Companies House (for example, director changes).

Getting the admin right matters - it’s what makes the legal ownership position clear, and it’s often needed for banks, investors, and future buyers.

6. Make Sure Your Ongoing Governance Still Works

After the share sale, it’s worth sanity-checking that the company’s governance is still fit for purpose, including:

• decision-making thresholds;
• director appointment/removal rights;
• dividend policy expectations; and
• exit options for shareholders.

If you’re bringing in a new shareholder, it’s often the right time to update or put in place a Shareholders Agreement so everyone’s clear on the rules from day one.

Key Takeaways

• A Share Purchase Agreement is the contract that documents the sale and purchase of company shares and sets out the legal rules for the transaction.
• Because a share sale usually transfers ownership of the company “as-is”, SPAs commonly include warranties, disclosure and indemnities to allocate risk between the buyer and seller.
• The SPA should clearly cover the shares being sold, the purchase price and payment mechanics, completion steps, and limits on claims.
• Small business share deals often involve other key documents too, including the Articles of Association, a Shareholders Agreement, and the formal share transfer paperwork.
• Whether you’re buying or selling, due diligence is essential - it helps the buyer understand what they’re acquiring and helps the seller properly disclose issues and avoid disputes.
• It’s rarely a good idea to DIY a Share Purchase Agreement, because the risk allocation clauses (like warranties and indemnities) need to be tailored to your business and the deal.

Note: This article is general information only and isn’t tax, accounting, or financial advice. If your share sale involves tax issues (such as stamp duty or HMRC filings), you should also speak to a qualified accountant or tax adviser.

If you’d like help buying or selling shares - including preparing a Share Purchase Agreement or negotiating terms - you can reach us at 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.