SPA Agreement: What To Include And How The Process Works

Whether you’re selling your company or acquiring a competitor, the “SPA agreement” is the main contract that makes it happen. In UK dealmaking, SPA stands for Share Purchase Agreement - not a day spa - and it’s the legal document that sets the price, risk allocation, and practical steps for transferring shares in a limited company.

If you’re a small business owner, getting the SPA right from day one is crucial. It can protect you from unexpected liabilities, secure your payment, and make sure the deal completes smoothly without last‑minute surprises.

In this guide, we’ll unpack what an SPA agreement is, how it differs from an asset sale, the key clauses to include, the step‑by‑step process to complete your transaction, and the UK legal and tax points you need to know.

What Is An SPA Agreement (Share Purchase Agreement)?

An SPA agreement (or SPA contract) is the legally binding agreement under which a buyer purchases shares from the seller(s) of a company. By buying the shares, the buyer effectively steps into the company’s shoes - owning all its assets, contracts, employees and liabilities (known and unknown), unless the SPA says otherwise.

In finance, “SPA” is standard shorthand across M&A deals, from micro-acquisitions to larger buyouts. For small businesses, a well‑drafted Share Sale Agreement covers the commercial deal you’ve negotiated and the legal protections you need to manage risk.

Core purposes of an SPA agreement include:

• Recording the agreed purchase price, how and when it will be paid, and any adjustments (for example, completion accounts or an earn‑out).
• Setting out conditions that must be satisfied before completion (like lender consent or regulatory notifications).
• Allocating risk through warranties, indemnities and limitations of liability.
• Dealing with employees, key contracts, leases, IP and customer data.
• Listing the documents and actions required on completion to transfer legal title to the shares.

Because a share purchase transfers the company as a whole, the SPA is typically more detailed than a simple sale contract. It works hand‑in‑hand with the disclosure letter (where the seller qualifies its statements) and ancillary documents like board minutes, consents and stock transfer forms.

SPA Vs Asset Purchase: Which Structure Suits Your Deal?

Before you dive into drafting, decide whether you’re doing a share purchase (SPA) or an asset purchase (APA). The structure affects tax, liabilities and practicalities.

Share Purchase (SPA)

Under an SPA, the buyer acquires the shares in the company. The company continues to own the business, with the same contracts, employees and trading history.

Pros:

• Smoother continuity - customer and supplier contracts, employees and licences often stay in place without needing to retender or re‑paper.
• Good for brand value - the same company number and trading history can help with credibility and finance facilities.
• Potentially simpler operationally - fewer third‑party consents if contracts are not change‑of‑control sensitive.

Cons:

• Buyer inherits historical liabilities, including things you may not know about (tax, disputes, compliance issues) - hence the need for strong warranties and indemnities.
• Careful due diligence is essential to avoid unpleasant surprises.

Asset Purchase (APA)

Under an asset sale, the buyer cherry‑picks specific assets (stock, equipment, IP, goodwill) and sometimes assumes selected contracts and employees. The seller retains the company entity itself.

Pros:

• Cleaner for buyers - you can avoid unwanted liabilities and ring‑fence what you take on.
• Useful where there are legacy risks or complex group structures.

Cons:

• More third‑party work - contracts and leases usually need assignment or novation, and employees may transfer under TUPE.
• Operational disruption - customers and suppliers may need to sign new terms.

If you’re weighing up an SPA vs APA, it often comes down to risk appetite, tax, and how easy it is to move key contracts and people. For example, if you need to move a premises, consider how assigning a lease would work in an asset deal versus keeping it in place via a share purchase.

Key Clauses Your SPA Contract Should Cover

Every deal is different, but most SPA agreements include a familiar set of protections and mechanics. Here are the core clauses to expect - and why they matter.

1) Price, Adjustments And Payment

• Purchase Price: The total consideration (cash, shares, loan notes). Spell out currency and any netting off of debt.
• Price Mechanism: Choose between a “locked box” (price fixed by historic accounts with leakage protections) or “completion accounts” (price adjusted post‑completion based on actual working capital, cash and debt).
• Deferred/Contingent Consideration: Earn‑outs tied to performance, vendor loans, or escrow/retention to cover warranty claims.
• Payment Mechanics: Who gets paid, when, and what needs to be delivered at completion as a condition of payment.

2) Conditions Precedent (CPs)

CPs are items that must be satisfied before the deal completes, such as:

• Third‑party consents (landlord, key customer, lender, franchisor).
• Regulatory notifications (e.g. National Security and Investment Act 2021, if applicable).
• Reorganisation steps (e.g. intra‑group IP transfer).
• Evidence of insurance or new financing in place.

Set clear long‑stop dates and who is responsible for each CP.

3) Warranties And Disclosure

Warranties are statements of fact about the company - its accounts, contracts, compliance, tax, IP, employees and disputes. They protect the buyer by allowing claims if a statement is untrue and the value is affected.

The seller will disclose exceptions in a formal disclosure letter and data room. From the seller perspective, thorough disclosure narrows risk. From the buyer perspective, warranties prompt deeper questions and surface issues before you inherit them. Many small business deals pair warranties with targeted indemnities for known risks.

To manage confidentiality during this stage, parties usually enter into a Non-Disclosure Agreement before sharing sensitive information.

4) Indemnities And Limitations Of Liability

Indemnities require the seller to reimburse specific losses on a pound‑for‑pound basis (for example, an ongoing tax enquiry or a known compliance issue). Sellers will push for caps, time limits, de minimis thresholds, and aggregate baskets for warranty claims. Buyers will want reasonable access to information and control of claims.

5) Restrictive Covenants And Seller Protections

To preserve value, buyers often require sellers to agree not to compete, solicit customers or poach staff for a period post‑completion. Restrictions need to be reasonable in scope, duration and geography to be enforceable under UK law.

6) Employees, Directors And Key People

Because the company continues as is in an SPA, employees remain employed on their existing contracts. You may still want comfort around key staff retention, bonuses, or new terms for owner‑managers. It’s common to put a founder on a Directors Service Agreement or fresh Employment Contract at completion.

7) Intellectual Property, Data And IT

Confirm ownership of brand assets, trademarks, website code, supplier portals and any licences. If the buyer will process personal data with the seller post‑completion (for example, transitional services), a tailored Data Processing Agreement can help ensure UK GDPR compliance.

8) Tax Covenant

Share deals usually include a tax covenant that makes the seller responsible for pre‑completion tax liabilities. Tie this to strong access and conduct provisions so the buyer can manage or settle claims efficiently.

9) Completion Mechanics And Ancillary Documents

The SPA should list exactly what each party delivers at completion - signed stock transfer forms, updated registers, board minutes, resignations/appointments, and consents. A practical way to manage this is to assemble a clear Completion Checklist early so everyone knows what’s required.

10) Post‑Completion Obligations

Spell out filings (like updating the PSC register and confirmation statement), release of charges, and any transitional services. If any contracts must be moved out of the seller’s group, use a Deed of Novation so the company keeps continuity with customers and suppliers.

The SPA Process: From Heads Of Terms To Completion

Every transaction has its own rhythm, but most SME share purchases follow a similar path. Here’s a practical, step‑by‑step overview.

Step 1: Confidentiality And Heads Of Terms

Start with an NDA to protect sensitive information while you explore the deal. Then agree high‑level commercial points in writing - often called Heads of Terms or a Term Sheet. It’s usually non‑binding (except for confidentiality, costs and exclusivity), but it keeps everyone aligned on price, timing, and any conditions.

Step 2: Legal, Financial And Commercial Due Diligence

Buyers should investigate the company’s legal, tax and financial position. This might include contracts, employees, litigation, compliance, IP, data, property, and insurance. For small businesses, a targeted Legal Due Diligence Package can be scaled to your budget while still catching the big issues.

As a seller, preparing a clean data room and addressing gaps early (for example, missing IP assignments or unsigned customer contracts) speeds up diligence and strengthens your negotiating position.

Step 3: Drafting The SPA Agreement And Disclosure Letter

One side usually circulates the first draft SPA. The other side proposes changes. In parallel, the seller compiles the disclosure letter and bundles, which formally qualify the warranties and share the key documents supporting each disclosure.

At this stage, you’ll agree the price mechanism (locked box vs completion accounts), any escrow or retention, and the exact completion deliverables.

Step 4: Satisfying Conditions Precedent

Work through the CPs: landlord or lender consents, regulatory notifications, corporate approvals. Allocate responsibilities and set a realistic timetable. Keep a running issues list so nothing slips.

Step 5: Signing And Completion

In smaller deals, signing and completion can happen on the same day. In others, you sign first and complete later once CPs are met. At completion, money changes hands and the parties exchange all documents listed in the SPA. Keep a tight checklist and run a brief completion call to tick items off in real time.

Step 6: Post‑Completion Actions

Update the company’s register of members, issue new share certificates, make any Companies House updates (including PSC register changes), pay stamp duty at 0.5% on stock transfers, and diarise notice periods for any transitional obligations. The company’s next confirmation statement should reflect the new ownership.

UK Law, Tax And Compliance Considerations

SPAs sit within a broader legal and regulatory context. Here are the big‑ticket items UK small businesses should keep in mind.

Companies Act And Corporate Governance

• Ensure the company has authority to transfer shares under its Articles of Association and any investment agreements. Some articles include pre‑emption rights or director consent requirements.
• Hold valid board and shareholder approvals for the transaction and any officer changes.
• Update statutory registers and issue/collect share certificates promptly after completion.

UK GDPR And Data Protection

• Due diligence usually involves sharing personal data about employees and customers. Limit this to what’s necessary, use secure data rooms, and put an NDA in place.
• If you’ll process personal data on someone else’s behalf post‑completion (for example, transitional support), make sure a suitable Data Processing Agreement is in place.

Tax On Share Sales

• Stamp duty at 0.5% applies on share transfers via stock transfer forms (usually payable by the buyer).
• Sellers should get tax advice on reliefs (e.g. Business Asset Disposal Relief). Buyers should focus on a robust tax covenant and any HMRC interactions in diligence.

National Security And Investment Act 2021

• Some acquisitions in sensitive sectors require notification to (or call‑in by) the UK Government. Small deals are not automatically exempt. Consider this early if your business touches critical technologies, defence, or key infrastructure.

Competition And Merger Control

• Most SME deals won’t trigger UK merger control thresholds, but if the combined business has significant market share in a local niche, take advice before closing.

Employees And Employment Law

• In a share purchase, employment contracts continue. Still, check for change‑of‑control provisions in bonus or option schemes, and agree any new Directors Service Agreement if founders are staying on.
• Keep an eye on accrued holiday, redundancy exposures and any ongoing grievances or tribunal claims flagged in diligence.

Commercial Contracts, Leases And IP

• Some contracts have change‑of‑control clauses. If so, you may need counterparty consent as a condition to completion.
• If an asset or contract sits outside the target company and needs moving, plan an orderly transfer using tools like a Deed of Novation or assignment (landlords often require a formal process for lease assignments).

Bribery, Sanctions And Regulatory Compliance

• Warranties often require compliance with the Bribery Act 2010, sanctions rules, health and safety and industry‑specific regulations. If the business is regulated (e.g. FCA‑authorised), you’ll need to handle permissions and notifications properly.

Shareholder And Investor Matters

• If there are multiple owners, a Shareholders Agreement can control how decisions are made, drag/tag rights and exit mechanics. These terms can affect how an SPA is negotiated or triggered.
• Where the buyer is issuing shares as part of the price, consider whether a Share Subscription Agreement is needed alongside the SPA.

Key Takeaways

• An SPA agreement (Share Purchase Agreement) is the core contract for buying or selling shares in a UK company - it sets the price, risk allocation and mechanics to transfer ownership.
• Decide early between a share purchase (SPA) and an asset purchase (APA). SPAs provide continuity but shift more historical risk to the buyer, so strong warranties, indemnities and due diligence are essential.
• Focus on the key clauses: price mechanism (locked box vs completion accounts), conditions precedent, warranties and disclosure, indemnities, restrictive covenants, tax covenant, and clear completion deliverables.
• Follow a structured process: NDA and Heads of Terms, targeted diligence, SPA and disclosure drafting, CPs, completion, and post‑completion filings. Practical tools like a Completion Checklist keep the deal on track.
• Build compliance in from the start - Companies Act approvals, stamp duty on share transfers, UK GDPR for data rooms and transitional services, and sector‑specific rules if applicable.
• Get the right documents in place around the SPA: a robust Share Sale Agreement, an NDA, tailored Data Processing Agreement if needed, and any Deeds of Novation for contracts that must move.
• If this feels like a lot, don’t stress - getting your legals right up front protects value and reduces headaches later. A scalable due diligence approach and a well‑drafted SPA are the best starting points.

If you’d like help preparing or reviewing an SPA agreement for your small business sale or acquisition, you can reach us at 08081347754 or team@sprintlaw.co.uk for a free, no‑obligations chat.