Share sale and purchase agreements

These share sale agreements are for the purchase or sale of less than full ownership of any private limited company. They are suitable whether you are the buyer or the seller as they can easily be adapted to favour either side. In particular, we include a menu of 140 warranties that should protect and reassure any buyer.


Shares sale agreement: simple transaction

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This agreement is for the sale of shares in a private company in any industry.

The sale is completed as a single cash deal.

The document includes a less extensive selection of warranties than the other shares sale agreements we offer.

It is suitable for transactions where the risks to the buyer are lower: such as when the buyer is familiar with the company, or when the seller is trusted.

Use this document for example when:

  • shares change hands within the existing body of shareholders and directors, such as on a management buy-in by a director, or on sale by one shareholder
  • you are buying from a close friend or relative, and you may not think it appropriate to tie that person down to the extent of a massive slate of detailed warranties
  • the risk of overstatement or understatement of assets or liabilities is low, so there is little risk to the buyer
  • the company is being sold to another company in the same group in a reorganisation of group structure

Share purchase agreement

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This is an agreement for the sale of a majority or a minority shareholding in a private company.

The purchase price is paid in cash (rather than shares in the buyer company).

The company whose shares are bought and sold could be in any industry. The seller and the buyer could be private individuals or other companies.

The document provides strong protection for the buyer through a set of 115 warranties, and through the possibility of a "claw back" of some part of the purchase price from the seller in the event that the company fails to produce expected profits.

However, could also be used by a seller and presented to the buyer. Our notes guide you as to how to strengthen the position of one party over the other. For example, the seller may wish to cap his liability, or bring in a guarantor, or limit the warranties given.

Share purchase and subscription agreement

This single document records two types of transactions at a time: a new shareholder subscribes for a newly issued shares whilst at the same time buying shares from existing shareholders.

A full raft of warranties protects the new shareholder’s investment as if he were buying whole company outright.

We include an optional provision for a reduction in the final price paid if company profit is not as expected.

The document provides the option to reference any loan the buyer may be making. The terms of any loan will need to be covered in a separate loan agreement

There are also options:

  • as to whether all shareholders are to be bound by warranties or only those who have intimate knowledge because they run the company - the directors
  • to include a guarantor

Share subscription agreement

A subscription agreement is appropriate to use when new shares are issued – to bring in a new shareholder, or increase the holding of an existing one.

This document gives the buyer a high level of protection through a formula for the final subscription price to be based on the future performance of the company, with a retention against poor performance. The subscriber pays in cash but holds back an agreed sum until after the next set of accounts.

If the accounting profit is not as promised, then the final balancing payment is reduced. The penalty reduction to balance due by you is calculated by reference to a simple, flexible formula.

The agreement provides the same protection to the subscriber as he would expect if the whole company were being bought outright. We have included a menu of 115 warranties (less what you decide to edit out).

As drawn, the document binds all the shareholders to the warranties, but you could decide that only shareholder-directors should be at risk.

It includes an option in case one or more of the selling shareholders is a trustee (as a trustee, he cannot give warranties).

If the subscriber is also lending money to the company then you should couple this document with a loan agreement.

Note: For the subscription by an existing shareholder consider the simple version of this document. The existing shareholder will require fewer warranties as he is already associated with company.

Shares subscription agreement: simple transaction

This is a simple subscription agreement for new shares where the subscriber does not need warranties about the state of the company.

It is intended for smaller and uncomplicated transactions: the subscriber may already be familiar with the company (for example, he or she may be a director or a shareholder), or may trust the shareholders, or the transaction might be low risk.

The subscription is for cash, with payments in two stages. The final price to be paid is dependent on the profit of the company in the next set of accounts. If the profit is not as promised, the subscriber can deduct an amount from the final payment. The penalty reduction of balance is calculated by reference to a simple, flexible formula.

Examples of use:

  • for the introduction of a family member into a company
  • a senior employee or director buy-in
  • the appointment of a new non-executive board member who requires only a nominal shareholding
  • for an existing shareholder to invest additional equity
  • in any case where a low price reduces the risks significantly

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What is a share sale and purchase agreement?

A share sale and purchase agreement is a legally binding contract for the sale of shares in a company between two people.

Those people may be individuals or companies.

Depending on the perspective of the party drafts the share sale and purchase agreement, the document might also be called a share purchase agreement (abbreviated to SPA), a shares sale agreement, a stock purchase agreement or a shares transfer agreement.

The document sets out the contractual terms under which the deal takes place, including not only details of the shares to be transferred at the agreed price, but also protection for both sides in the form of limitation of liability, warranties, representations, restrictions on the seller, and confidentiality.

A share purchase agreement could be used for the sale of one share or many. To buy or sell the entire share capital in the company, use a company sale agreement. To buy an unincorporated business, use a business sale agreement.

What is the difference between a share sale agreement and an asset sale agreement?

With a share sale agreement, you are selling or buying shares (an ownership interest) in a company that owns assets. Those assets could include many different things, from machinery to IT equipment to specialist software systems.

With an asset sale, you are selling or buying particular identified assets only (possibly one, possibly all of the them). The result is that other property and debts remain in the original business and the assets that you have bought transfer to your business.

If you are buying shares, you'll also consider that the business not only owns assets, but may also have liabilities, whether an overdraft, a loan from another investor or an obligation to fulfil an order. Liabilities offset the value of the assets so that the net asset value of the company is lower than the total asset value.

An agreement for the share of sales will take into account the net asset value of the company. The price for the shares may consider not only what money could be raised if all the assets were sold and liabilities repaid (the liquidation value), but also how much the value of the company might increase over a number of years.

You can use an asset purchase agreement to buy assets from a company, or you can use one to buy assets from a partnership or sole trader.

When should you use a share and purchase agreement?

Although you would most obviously use a share sale agreement template as the basis for your final contract after negotiations have concluded, you can also use one throughout the sale process.

A draft agreement can act as an aide-memoire during negotiations to remind you what may be important to you, but also what may be important to the other side. You may be able to win valuable concessions that the other party hasn't considered. In particular, you may be able to obtain warranties (promises as to the state of something) that protect you without having to give up anything yourself.

When negotiations are coming to an end, but before they are finished, your share purchase agreement template could be used to record heads of terms - the key things that you have agreed on - before adding back additional legal wording.

Terms in a share purchase agreement


Consideration is the legal term for the thing being given in return for the company shares. It may be money. It could be something else.

For a sale to occur rather than a gift, there must be 'valuable consideration'. How valuable it is does not matter. Although the value was greater in the past, there are many transactions now concluded for a peppercorn.

However, if the consideration is not small, the purchase price payable by the buyer for the shares is likely to depend on the completion accounts, prior annual financial statements and forecasted management accounts.

Restrictive covenants

Restrictive covenants are restrictions on what the seller may do after the share sale has completed. Typically they include not to be involved in any competing business (known as a non-competition clause) and solicit or poach employees or customers of the company.

To be enforceable, restrictions must be reasonable and must not be a restraint of trade. They should be limited in scope (geographical and function) and in time. For example, trying to restrict the seller from being involved in any business anywhere indefinitely is unlikely to be enforceable. Preventing the seller from being an owner of a business in the same market for five years is more likely to be enforceable.

We explain more about what restrictive covenants are and how to use them.

Warranties form the essence of any sale and purchase deal. They protect the buyer, who does not have all of the information available to the seller.

It is normal, fair and reasonable for a buyer to demand warranties and for a seller to give them.

There is advantage in being the party who presents the first draft of the shares purchase agreement. The reason is that the person who draws the document decides which warranties to include or exclude.

The buyer could include as many as possible, and force concessions on other points in return for removing a warranty that wasn’t particularly important to them. The seller could reduce the number considerably and hope that the buyer is not aware of what could be included.

Our article on warranties gives a full explanation.

The number and scope of the warranties given with each of these documents varies slightly, but most contain around 115, set out in around 15 sections. That may sound an awful lot, but we reassure you that you will need them.

If you are the buyer, you should start with a full set unless you are sure you knows everything there is to know about his proposed acquisition, or the value is very small, or the business is not started. You can follow the drafting notes as to what to delete.

These sale and purchase agreements include a tax indemnity clause (also known as a tax covenant). This gives the buyer an indemnity for all pre-completion tax liabilities in the target company that wouldn't have otherwise arisen in the ordinary course of business (or provided for and disclosed in the accounts). Like others, tax warranties are beneficial for obtaining disclosure from the seller so that any issues or risks can be mitigated by using specific indemnities.

Limitation of liability

Limitation of liability clauses limit the amount of damages that one party has to pay the other if the other suffers loss as a result of a breach of the sale contract.

What restrictions are there on selling shares?

Shareholders have a right to transfer their shares to whoever they want. Transfers can happen not only as a result of a sale, but also as a result of a gift or an inheritance.

However, shareholders can agree amongst themselves that the company or other existing shareholders have rights to buy the shares of another shareholder before they are sold to anyone else (known as a right of preference, a right of pre-emption or a right of first refusal) or they can agree that some rights only apply to qualifying shareholders and that new shareholders may not qualify.

These rights may be recorded in the articles of association of the company, which is a public document held at Companies House. However, they may also be recorded in a shareholders' agreement, which is private.

So when buying shares, you'll want to ask whether there might be any restrictions either in the articles or a shareholders' agreement that prevent the transfer. You might also include a warranty that there are none.

Completing the transfer

After signing and dating the agreement, the contract will be legally binding. You don't need approval from a solicitor. However, the obligation to transfer the shares or payment might be subject to other events such as payment of stamp duty, holding meetings required to approve the transfer (if directors or shareholders have a right to veto it), filing of notices and integration into the acquirer's business.

Do you need to file the share sale agreement with Companies House?

A share sale agreement is a private document. There is no requirement to file it with Companies House.

You only need to inform Companies House of a change in ownership of shares.

What customers thought
Very Good
Very good.
Milena Streater
Sufficiently Comprehensive
Simple version is sufficiently comprehensive and easy to understand being a layman to legalise. Editable word document is a plus. Competively priced for docs and review.
Terence Darcy Bacon
Quick Success
The only challenge I had would be to have the drafting or editing notes included at the clause in a different colour where it is applicable.
Other than that, enjoyed the template.

Nico Strydom
Nico Strydom
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