A share purchase agreement is the legally binding contract that sets out the terms on which a buyer acquires shares in a UK company from a seller, covering the purchase price, warranties, indemnities and the mechanics of completion.
You'll also see it called a share sale agreement, and it's a different document entirely from an asset purchase agreement, which transfers specific business assets rather than company shares.
This guide covers how a share sale differs from an asset purchase, the clauses worth negotiating hardest, what to check during due diligence, and the warranties and indemnities that actually protect you once you've signed.
Share Purchase Agreement vs Asset Purchase
A share purchase agreement transfers shares in a company, giving the buyer ownership or control of the company and its underlying business, contracts, staff and liabilities, while an asset purchase lets the buyer select specific assets and liabilities to acquire.
That's the core share purchase agreement vs asset purchase distinction founders face when buying or selling a UK business: a share sale can be simpler to implement because ownership changes without requiring individual transfers of the company's underlying assets, but the buyer acquires the company with its existing liabilities, contracts and history.
Tax treatment differs too, and this is where founders get caught out. On a share sale, Stamp Duty generally applies at 0.5% of the transaction value on transfers over £1,000, rounded up to the nearest £5.
The duty must generally be paid, and the stock transfer documentation submitted, within 30 days of the instrument being signed and dated. Transfers of £1,000 or less are generally exempt under the current de minimis rule, subject to the applicable conditions.
That's set to change. HMRC published draft legislation on 13 July 2026 for a new Securities Transfer Tax (STT), intended to replace Stamp Duty and Stamp Duty Reserve Tax from 2027, with the technical consultation closing on 7 September 2026.
The final rules and commencement date remain subject to the legislative process, so founders planning a sale after 2027 should check the rules applicable at the time.
Key Clauses in a Share Purchase Agreement
The share purchase agreement key clauses that matter most are parties and share details, purchase price, warranties, indemnities, conditions precedent, restrictive covenants and completion mechanics, with price usually the one founders spend longest negotiating.
The pricing mechanism in particular shapes how a deal actually plays out: some agreements use a locked box, where price is fixed at signing against a historical balance sheet with no post-completion adjustment, while others use completion accounts, where price is estimated at completion and reconciled against actual figures afterwards.
Sellers tend to favour locked box for its certainty; buyers often push for completion accounts because it protects them against last-minute changes in the target's financial position.
Restrictive covenants deserve just as much attention. These stop a seller from setting up a competing business, poaching staff, or approaching customers for an agreed period after completion. Without them, you can pay full price for a company and watch its founder rebuild a rival down the road.
SPA Due Diligence Checklist
A thorough SPA due diligence checklist starts with the target's contracts, outstanding litigation, intellectual property ownership, tax position and management accounts, because risks that are not identified and protected against in the transaction documents can be difficult to recover after completion.
Work through this before you negotiate warranties, not after: gaps you find early become specific indemnities later, which protect you far better than a generic warranty does.
One regulatory check worth a mention even though it rarely bites at startup scale: the CMA can review a UK merger if the target's annual UK turnover exceeds £100 million, or if the combined parties have a 25% or greater share of supply that increases as a result of the merger, with at least one party having UK turnover of £10 million or more, or under a hybrid test where one party has a 33% or greater share of supply and UK turnover exceeding £350 million.
Most SME and early-stage share sales sit nowhere near these thresholds, but it's worth knowing the ceiling exists if you're scaling toward a larger exit.
Warranties, Indemnities and Disclosure
Warranties are the seller's contractual assurances about the state of the business, such as that it owns its IP or that the accounts are accurate, and if one turns out to be false, you can claim damages for breach of contract.
Indemnities work differently: they're a direct promise to cover a specific, identified loss, such as a known tax exposure, regardless of whether there's technically a breach. For founders, indemnities can provide more direct protection where due diligence identifies a specific, quantifiable risk that the parties agree the seller should cover.
The disclosure letter sits alongside the warranties and lists everything the seller is telling you about upfront. Matters that are properly disclosed in accordance with the agreement's disclosure requirements may limit or prevent a subsequent warranty claim, so read the disclosure letter as closely as the agreement itself.
Common Mistakes Founders Make in SPAs
One of the key mistakes identified by LegalVision is inadequate due diligence, which can allow undisclosed debts, pending litigation or IP problems to surface only after completion.
Other recurring errors from the same analysis: leaving representations and warranties too vague to actually protect the buyer; failing to address what happens after closing, including staff retention, supplier handover, and any transitional support from the seller; weak or missing restrictive covenants that leave the seller free to compete; thin indemnification and liability caps; and overlooking price adjustment mechanisms like working capital true-ups or earn-outs altogether.
None of these are exotic failures: they are the six mistakes highlighted in LegalVision's analysis, which is why getting this document right matters more than adapting it from a generic template. DIY templates are a consistently cited source of exactly these problems.
FAQs
1. What is the difference between a share purchase agreement and an asset purchase agreement?
A share purchase transfers shares in a company, giving the buyer ownership of the business along with its contracts, liabilities and employees, while an asset purchase lets the buyer select specific assets to acquire and leave the rest behind. The practical effect: the buyer acquires the company together with its existing liabilities and obligations, including risks that may not be immediately apparent, which is why due diligence is particularly important in a share sale.
2. Do founders need a solicitor to complete a share purchase?
It's not a strict legal requirement, but it's strongly advised given how much complexity sits inside a share purchase agreement. UK legal sources consistently flag DIY templates as a common source of disputes, since a share sale carries tax, contractual and regulatory consequences that are hard to spot without specialist review.
3. What are warranties and indemnities in a share purchase agreement?
Warranties are the seller's assurances about facts like IP ownership or account accuracy, giving the buyer a damages claim if they're false; indemnities are direct promises to cover a specific, known loss regardless of breach. Most deals use both: warranties for general protection, indemnities for risks due diligence has already identified.
Also Read: Sponsor Licence for Startups: How to Hire International Talent Legally
Sources: Figures and thresholds drawn from GOV.UK (Stamp Duty on share transfers; CMA merger investigation thresholds), HMRC's draft Securities Transfer Tax legislation (July 2026), and LegalVision's 2024 analysis of common share purchase agreement drafting mistakes. Figures reflect the most recent available guidance at the time of writing.
The EP+ Editorial Desk covers UK startups, founder stories, and venture capital. All editorial content is independently produced and human-reviewed before publication.
