Share purchase agreement (SPA): what it is and what to include

What a share purchase agreement is

A share purchase agreement records the sale of equity in a target company from one or more sellers to one or more buyers. Instead of transferring individual assets and liabilities, the buyer acquires the shares, and with them the company as a whole, including its contracts, employees, licenses, and obligations. In the United States, this document is frequently called a stock purchase agreement, and the two terms are used interchangeably for the same type of deal.

The SPA governs the transfer of both legal and beneficial title to the shares, sets the purchase price and how it is paid, and defines what each side must do at signing and at closing. It differs from an asset purchase agreement, in which the buyer selects specific assets and assumes only agreed liabilities. Because a share deal carries the target’s full history, buyers rely heavily on due diligence, warranties, and indemnities to manage inherited risk.

Governing law is usually a matter of state law, and many US deals select Delaware or New York law by agreement. The precise formalities for transferring shares, the enforceability of certain limitations on liability, and any regulatory approvals depend on the jurisdiction and the nature of the business.

Key terms and clauses to include

A share purchase agreement should be complete enough that the parties know exactly what is being sold, for how much, and on what conditions. The following clauses appear in most well-structured SPAs.

• Parties and recitals: identify the sellers, the buyer, and the target company, and summarize the intended transaction.
• Sale and purchase of shares: describe the shares being sold (class, number, and percentage of the company) and confirm they are transferred free of liens and encumbrances.
• Purchase price and payment mechanics: state the price and the method used to fix it, such as a locked box, completion accounts, or a working capital adjustment, and address any deferred consideration or earn-out.
• Conditions precedent: list what must happen before closing, including regulatory clearances, third-party consents, and any required antitrust filing such as a Hart-Scott-Rodino notification where applicable.
• Closing deliverables: specify what changes hands at completion, such as stock certificates, executed stock transfer instruments, board and shareholder resolutions, and director resignations.
• Representations and warranties: capture the seller’s statements about the company (ownership of shares, financial statements, tax, litigation, compliance, and material contracts) and the buyer’s statements about its authority and funding.
• Disclosure schedule: qualify the warranties by listing exceptions, so the seller is not liable for matters that were fairly disclosed.
• Covenants: govern conduct between signing and closing, and may include post-closing restrictions such as non-compete and non-solicitation obligations.
• Indemnification: set out how the buyer is compensated for breaches, including caps, baskets, de minimis thresholds, and survival periods.
• Limitations on liability: define the maximum exposure and the time limits within which claims must be brought.
• Tax matters: allocate responsibility for pre-closing and post-closing taxes and cover any tax elections.
• Termination: state when and how a party may walk away before closing.
• Confidentiality, governing law, dispute resolution, and boilerplate: cover entire agreement, notices, assignment, and severability.

The interaction between the price mechanics, the warranties, and the indemnity limitations is where most negotiation happens, because together they decide who bears which risks after the deal closes.

When you need one

You need a share purchase agreement whenever ownership of a company changes hands through its shares rather than its assets. Typical situations include a full acquisition of a company, the sale of a majority or minority stake, a founder or shareholder exit, a private equity buyout, and a secondary sale of shares between existing and incoming investors.

An SPA is also the right instrument when a buyer wants enforceable warranties and indemnities from the seller, or when the deal is conditional on regulatory approval or third-party consent. If instead the company is issuing new shares to raise capital, the parties usually use a subscription agreement, because no existing shares are being transferred. For a straightforward transfer of a small holding, a short stock transfer form may follow the SPA, but the SPA remains the document that sets the commercial terms and the risk allocation between the parties.

Common pitfalls

The most common problems in SPAs come from vague drafting and neglected follow-through. Price mechanics that are described loosely, for example a working capital adjustment with no clear reference accounts, lead to disputes at completion. A thin or inaccurate disclosure schedule exposes the seller to warranty claims, while overbroad warranties give the buyer weaker protection than it thinks.

Other frequent issues include ignoring required regulatory approvals, mismatching survival periods and liability caps so that a claim is capped but effectively unrecoverable, and forgetting conditions that should have been satisfied before closing. Buyers also underestimate the work that begins after signing: earn-out measurement periods, escrow release dates, indemnity survival deadlines, and post-closing covenants all carry dates that must be met, and missing them can forfeit money or rights.

That last pitfall is really a contract management problem. A signed SPA generates obligations that run for months or years after closing, and they only protect you if someone tracks them. Disciplined contract management means the executed agreement lives in a single system of record, with its key dates, thresholds, and post-closing commitments captured and monitored rather than buried in a folder.

A CLM platform like Pactolane supports this by holding the executed SPA in a contract repository with an audit trail, and by sending deadline alerts for milestones such as escrow release and indemnity survival cutoffs. Its AI copilot, PactAI, can extract key dates and terms, score risk on a 0 to 100 scale, run exposure analysis on indemnity limits, and flag conflicts across your other contracts, so your team can decide with the full picture in front of them. There is no downloadable template here; the goal is to help you understand the agreement and manage it well once it is signed.