Share Purchase Agreements (SPAs) in UK M&A: Key Terms and Risks

If you’re buying or selling a UK limited company, you’ll very commonly come across a Share Purchase Agreement (usually shortened to “SPA”). In plain English, an SPA is the contract that sets out what’s being sold (the shares), the price, and the legal promises both sides are making.

In a share-sale M&A transaction, the SPA is where the deal becomes “real”. It’s also where a lot of risk either gets managed properly or quietly slips through the cracks.

This guide is written for small business owners and founders (not big corporates) who want to understand how an SPA in M&A works, what to look out for, and how to protect your business before you sign.

What Is An SPA In M&A (And Why Does It Matter So Much)?

In an M&A context, “SPA” stands for Share Purchase Agreement. It’s the main contract used when the buyer purchases shares in a company from the existing shareholders.

That’s different from an “asset purchase”, where the buyer buys selected assets (like equipment, stock, IP, customer lists) rather than the company itself.

For small businesses, share sales are common because they can be a relatively straightforward way to transfer:

• existing contracts and supplier arrangements
• employees
• brand and goodwill
• licences and accreditations (depending on the licence terms)
• the trading history of the company

But here’s the big catch: if you buy the shares, you’re buying the company as-is - including its liabilities (known and unknown).

That’s why, in an SPA M&A deal, the SPA is packed with legal tools to allocate risk, such as warranties, indemnities, limitations, disclosure, and completion mechanics.

If you’re approaching this without a clear SPA, you’re essentially relying on assumptions - and assumptions are expensive in M&A.

When Do You Need A Share Purchase Agreement (And What Else Sits Alongside It)?

If the transaction is a share sale (rather than an asset sale), you typically need an SPA whenever:

• 100% of the shares are being sold; or
• a majority stake is being sold (e.g. 60%, 75%); or
• a minority stake is being sold but the buyer still wants clear protections and governance rights.

In practice, even smaller “friendly” acquisitions should still be documented properly. A handshake deal might feel faster, but it often creates disputes later (especially around what was promised, what was included, and when payment was due).

Common Documents That Come With An SPA

In a typical deal, the SPA won’t be the only document. You might also see:

• Heads of terms (a commercial roadmap before lawyers fully draft the SPA)
• Disclosure letter (seller’s disclosures against warranties)
• Board minutes and shareholder resolutions approving the transaction
• Stock transfer forms and updated statutory registers
• Completion accounts or a locked-box schedule (depending on pricing method)
• Employment and incentive documents if key staff are staying on
• New governance arrangements between shareholders post-deal

If the buyer is not acquiring 100% of the company, it’s very common to put a Shareholders Agreement in place at (or shortly after) completion to set out control, voting, exit rights, and how future disputes get handled.

And if the transaction is structured as a business sale (rather than purely a share transfer), you may also see agreements that overlap with Business Sale Agreement style terms - particularly where the deal involves transitional services, handover obligations, or restraints of trade.

Key Clauses In An SPA (The Parts That Usually Decide Whether The Deal Is “Safe”)

Most SPAs follow a familiar structure, but the detail is where the risk lives. Below are the clauses small businesses should pay close attention to in an SPA in M&A transaction.

1) Purchase Price And How It’s Calculated

The SPA should clearly state:

• the headline price
• what the price includes (cash-free/debt-free assumptions, working capital targets, etc.)
• how and when payment is made (upfront, deferred, earn-out)
• any retention or escrow (money held back to cover potential claims)

For small business acquisitions, a common friction point is earn-outs (where part of the price is paid later if performance targets are hit). Earn-outs can work well, but only if the SPA is crystal clear about:

• how revenue/profit is measured
• accounting policies to be used
• buyer obligations not to undermine the target’s ability to hit targets
• what happens if the seller exits the business early

Note: these are commercial and financial issues as well as legal ones. Sprintlaw can help with the legal drafting and negotiation in the SPA, but you should also get advice from your accountant or tax adviser on the numbers, tax treatment, and accounting approach.

2) Completion Mechanics (What Actually Happens On The Day)

“Completion” is the legal moment the shares transfer and ownership changes hands.

The SPA usually sets out a completion checklist: what documents are delivered, what approvals must be in place, and what must be true before the buyer is obliged to complete. Some deals also have a gap between signing and completion (for example, to obtain landlord consent, client approvals, or regulatory clearance).

This is where a structured Completion Checklist can help keep the transaction on track and reduce last-minute surprises.

3) Warranties (Promises About The Business)

Warranties are statements the seller gives about the company - for example:

• accounts are accurate
• tax has been properly paid and filed
• there are no undisclosed disputes or litigation
• key contracts are valid and not in breach
• the company owns its IP (or has proper licences)
• employees have proper terms and there are no hidden claims

If a warranty is untrue and the buyer suffers loss, the buyer may bring a claim under the SPA (subject to limits, timeframes, and the disclosure process).

From a seller’s point of view, warranties need to be carefully controlled and properly disclosed against - otherwise you can accidentally promise more than you intended.

4) Indemnities (Specific Risk Protection)

Indemnities are different from warranties. They usually deal with known risks and allocate responsibility clearly.

For example, if there’s a known HMRC enquiry, an ongoing dispute, or a specific historic compliance issue, the buyer might request an indemnity so that if that problem turns into a cost, the seller reimburses it.

Indemnities can be heavily negotiated in a share-sale M&A deal because they can shift significant financial risk back to the seller after completion.

5) Limitations Of Liability (Caps, Time Limits, And Claim Rules)

Most SPAs include limitations to stop warranty and indemnity claims becoming open-ended. Common limitations include:

• financial cap (maximum total liability)
• de minimis (minimum claim size)
• basket/threshold (claims only payable once they exceed a total amount)
• time limits (e.g. 12–24 months for general warranties; longer for tax)
• procedural rules for notifying and conducting claims

These terms matter a lot for small businesses. As a seller, you don’t want your exit to be followed by years of uncertainty. As a buyer, you want enough runway to detect issues that don’t show up on day one.

6) Restrictive Covenants (Protecting The Buyer’s Purchase)

Buyers often want protections to stop the seller from immediately starting a competing business or poaching staff and clients.

Well-drafted restrictive covenants can help protect goodwill - but they must be reasonable to be enforceable (scope, duration, geography, and activities all matter).

Due Diligence: What You Should Check Before Signing An SPA

Due diligence is the buyer’s process for verifying what they’re buying. Even if you “know” the business (for example, you’re buying out a co-founder, family member, or a competitor you’ve watched for years), due diligence is still essential.

In an SPA in M&A transaction, due diligence usually informs:

• what warranties are needed (and how heavily they’re negotiated)
• what indemnities the buyer requests
• the price and whether part of it should be deferred
• whether there should be conditions to completion

Typical Small Business Due Diligence Areas

• Corporate: Companies House filings, share capital, option arrangements, who owns what shares
• Financial: accounts, management numbers, cash flow, debts, aged receivables
• Tax: VAT, PAYE, corporation tax, filings, any correspondence with HMRC
• Commercial: customer and supplier contracts, change of control clauses, termination rights
• Employment: contracts, policies, disputes, status of contractors vs employees
• Property: lease terms, break clauses, consents, rent reviews
• IP and tech: ownership of brand, website, code, software licences
• Data and privacy: customer databases, marketing lists, GDPR compliance

On that last point, it’s often a red flag if the target company collects customer data but doesn’t have a usable Privacy Policy or clear internal processes around retention and security. For many small businesses, data issues don’t show up until a buyer looks closely - and then they can affect valuation and deal structure.

If you want a structured approach rather than reinventing the wheel, a Legal Due Diligence Package can help you work through the risk areas in a practical, documented way.

Signing, Completion, And Post-Completion: How To Avoid Common SPA Pitfalls

Once the SPA is agreed, it’s tempting to think the hard part is done. But small business deals often run into trouble in the final stretch because practical steps get missed.

Make Sure The Contract Is Properly Executed

SPAs can be signed as a standard contract or, in some cases, as a deed (depending on the deal structure and documents being signed alongside it). Either way, signing correctly matters - especially where directors are signing on behalf of companies.

If you’re unsure what “properly signed” means in practice, it’s worth checking the requirements around executing contracts so the agreement is enforceable and not vulnerable to technical challenges later.

It also helps to understand the basics of legally binding contracts so you’re clear on when you’re committed (particularly if you’ve been negotiating by email and exchanging drafts quickly).

Watch For “Change Of Control” Clauses

In a share sale, the company continues - but ownership changes. Many commercial contracts treat that as a trigger event allowing termination, price changes, or consent requirements.

Common places to find change of control restrictions include:

• key customer agreements
• software licences
• finance agreements
• leases
• supplier or distribution agreements

If you miss these and complete anyway, you can accidentally buy a business whose most important contracts can be terminated immediately.

Plan For Transitional Arrangements

Small business acquisitions often rely on the seller staying involved for a handover period. If that’s the plan, make sure the arrangement is documented clearly (duties, time commitments, pay, confidentiality, IP, and exit terms).

If the seller is staying on as an employee (or if key staff are being retained), having clean Employment Contract documentation can prevent messy misunderstandings about role expectations and post-sale restraints.

Think Ahead: What If A Dispute Happens?

No one enters an M&A deal expecting a dispute. But it’s sensible to assume misunderstandings can happen - especially if there are deferred payments, earn-outs, or warranty claims.

Your SPA should include a clear dispute resolution clause. In some cases, parties also put a separate settlement framework in place for known issues; depending on your scenario, a Deed of Settlement can be relevant where you’re resolving a dispute as part of the deal (for example, where the sale is happening alongside an exit disagreement between shareholders).

Key Takeaways

• An SPA in M&A is the main contract for a share sale, and it’s where price, risk, and legal responsibility are locked in.
• Buying shares usually means buying the company’s liabilities too, so your SPA should allocate risk through warranties, indemnities, disclosure, and clear limits on liability.
• Due diligence is not a formality - it’s how you verify what you’re buying and decide what protections you need in the SPA.
• Pay close attention to purchase price mechanics (especially earn-outs), completion steps, and change of control clauses in key contracts.
• Make sure the SPA is properly signed and executed, and don’t leave completion deliverables and post-completion filings to chance.
• If the buyer won’t own 100% after the deal, consider putting a Shareholders Agreement in place to prevent future governance disputes.

If you’d like help drafting, reviewing, or negotiating an SPA for your next acquisition or exit, you can reach us at 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.