TLDR:
A share purchase agreement is a legal contract governing the sale and purchase of company shares, detailing the price, conditions, representations, warranties, and indemnities of the transaction.
SPA Structure and Key Provisions
A share purchase agreement governs the acquisition of a company through stock purchase (as opposed to asset purchase). Key sections include: (1) Purchase price and payment mechanics — consideration structure, escrow arrangements, earnout provisions; (2) Representations and warranties — seller’s factual claims about the company’s financial condition, legal compliance, IP ownership, etc.; (3) Covenants — obligations of both parties between signing and closing; (4) Conditions to closing — events that must occur before the deal can close; (5) Indemnification — remedies for breaches of representations; and (6) Termination provisions.
Reps, Warranties and Indemnities
Representations and warranties allocate risk for facts about the company as of signing and closing. Buyers typically obtain representations covering financial statements, taxes, litigation, IP ownership, employee matters, material contracts, and compliance with laws. Indemnification provisions specify the seller’s obligation to compensate the buyer for breaches, subject to caps, baskets (deductibles), and survival periods. Reps and warranties insurance is increasingly common in mid-market deals, transferring this risk to insurers and enabling cleaner exits for sellers.
Conditions to Closing
The SPA specifies conditions that must be satisfied before closing occurs — regulatory approvals (antitrust, foreign investment, sector-specific), third-party consents, no material adverse change in the business, accuracy of representations at closing, and delivery of closing documents. Failure of conditions can give the buyer or seller a right to terminate, raising contentious issues over which party bears the risk of unmet conditions.