29th January 2025
Whether you’re a seasoned entrepreneur or embarking on your first acquisition, at Myers & Co we understand that business transactions can feel quite daunting. Our dedicated corporate and commercial team is here to guide you and provide you with expert advice and personalised support to ensure your transactions are smooth and successful.
One of the most important documents in a share transaction is the Share Purchase Agreement (SPA). This document outlines the terms and conditions under which shares of a company are bought and sold, ensuring that both parties are clear on their rights and obligations.
Jen Goodwin explores the key things you need to know about SPAs when entering a business transaction.
The primary purpose of an SPA is to establish a clear, legally binding framework for the sale and purchase of shares. This agreement helps to:
An effective SPA includes several key provisions to ensure a smooth transaction.
The definition section of an SPA defines the key terms used throughout the agreement. Defining these terms ensures that all parties have a clear understanding of the clauses within the SPA, which helps to avoid any confusion later on. Commonly defined terms in an SPA include:
At the completion stage, both the seller and buyer have specific obligations to fulfil.
For the seller, this typically includes delivering certain documents to the buyer. The buyer’s responsibilities include making the payments due to the seller.
Both parties make certain representations and warranties about the company and the transaction.
For the seller, this might include statements about the company’s assets, liabilities, and financial condition. For the buyer, it might include assurances about their ability to complete the purchase.
Covenants are promises made by the parties to take or refrain from taking certain actions before and after completion. For instance, the seller might agree not to engage in activities that could harm the company’s value before the sale is completed.
If there is a period of time between exchange and completion, the parties can agree that certain conditions must be met before the transaction can be completed. These might include:
The indemnities section of the SPA outlines who will be responsible for any losses or liabilities that arise from breaching the agreement or other specific events.
The limitation clause in the SPA usually limits the seller’s liability for any potential claims for breach of warranty or claims under the tax covenant. Essentially, it sets a time limit and a maximum amount on the seller’s liability for any issues that might arise. It may also specify that minor issues are not the seller’s responsibility unless they exceed a certain value.
This section specifies the legal jurisdiction that will govern the agreement and methods for resolving any disputes that arise.
There are common provisions found in an SPA. However, each SPA will need to be tailored to the specific transaction as it is not one-size-fits-all.
By understanding the purpose and main provisions of a SPA, both buyers and sellers can navigate their transactions with confidence.
At Myers & Co, we are here to help you through every step of the process, providing the expertise and support you need for your business ventures.
For further information, please contact Jen Goodwin, Head of Corporate & Associate Director on 01782 491025 or email jen.goodwin@myerssolicitors.co.uk. Myers & Co has offices in Stoke-on-Trent, Staffordshire.
