What Is a Share Purchase Agreement? A Founder’s Plain-English Guide to the SPA

If the letter of intent is where a business sale begins, the share purchase agreement is where it actually happens. It is the document that transfers your company from your ownership to someone else’s, and it is almost always the longest, densest, and most consequential piece of paper a founder will ever sign. Yet most owners meet it for the first time deep into a deal, exhausted, and take far too much of it on trust.

I’m Adam J. Graham, and having sold businesses of my own, I can tell you that the share purchase agreement, or SPA, is where deals are won and lost out of sight. The headline price you celebrated when you signed the letter of intent is only a promise until the SPA turns it into a binding, enforceable reality, complete with all the conditions and clauses that decide how much of that money you actually keep. This is a plain-English guide to what is inside it and why it matters.

What a share purchase agreement actually is

A share purchase agreement is the legally binding contract under which a buyer acquires the shares of your company from you and any other shareholders. When you sell shares, the buyer takes on the whole company as it stands, including its assets, its contracts, and crucially its liabilities. That is different from an asset sale, where a buyer cherry-picks specific parts of the business and leaves the corporate shell behind.

Because a share sale hands over everything, buyers protect themselves heavily inside the SPA. They cannot inspect every corner of your business, so they use the contract to shift risk back onto you through promises, protections, and adjustments. Understanding those mechanisms is the difference between a clean exit and a deal that keeps costing you money long after completion.

The parts of the SPA that matter most

The document will be long, but a handful of sections do most of the work. These are the ones worth reading slowly and negotiating hard.

The consideration and how it is paid. This is the price and its structure. Is it all cash on completion, or is some deferred, held back, or tied to future performance through an earn-out? The number in the letter of intent means little if half of it depends on hitting targets you may not control after you have handed over the keys.

Warranties. These are the statements you make about the business being true: that the accounts are accurate, the tax is paid, the contracts are valid, there is no undisclosed litigation. If a warranty turns out to be false, the buyer can claim against you for the loss. Warranties are where a surprising amount of a founder’s post-sale exposure lives.

Indemnities. These are specific promises to cover particular risks pound for pound, often for issues flagged during due diligence. Unlike a warranty claim, an indemnity usually does not require the buyer to prove loss in the same way, which makes it a far stronger tool for them. Watch these closely.

Limitations of liability. This is your protection. It caps how much you can be forced to pay back, sets time limits on when claims can be brought, and establishes minimum thresholds below which a buyer cannot come after you. A well-negotiated set of limitations is one of the most valuable things your advisers will do for you.

Restrictive covenants. These are the promises you make about what you will not do after the sale, typically not competing with the business or poaching its staff and customers for a defined period. They are normal and expected, but their scope and length are negotiable and can seriously affect your freedom afterwards.

The disclosure letter: your best defence

Running alongside the SPA is a document founders often underestimate: the disclosure letter. This is where you formally tell the buyer about anything that would otherwise make a warranty untrue. If you have disclosed something properly, the buyer cannot later claim against you for it, because they went in with their eyes open.

This makes the disclosure letter your single most important protection. Thorough, careful disclosure is not admitting weakness. It is closing the doors through which future claims would otherwise walk. Founders who rush this document, or treat it as an afterthought, hand the buyer easy grounds for a claim months after the champagne has gone flat.

Completion accounts and price adjustments

The final price is rarely the fixed number you expect. Many SPAs include a mechanism to adjust the price based on the actual state of the business at completion, usually its cash, debt, and working capital. If the business has less cash or more debt than assumed, the price drops accordingly.

These adjustments are legitimate, but they are also fertile ground for disputes, because both sides have an incentive to interpret the numbers in their favour. Agreeing clear definitions up front, and understanding exactly how working capital will be calculated, prevents a nasty argument in the weeks after you thought the deal was done.

Why founders should never sign an SPA alone

The buyer’s lawyers draft the first version of the SPA, and they draft it to protect the buyer. Every clause starts life tilted in their favour, and it stays that way unless someone pushes back clause by clause. That someone is your legal and corporate finance team, and this is the moment their fees earn their keep many times over.

A good adviser will fight for tighter warranty limitations, a fair liability cap, a sensible time limit on claims, and clean definitions in the price adjustment. Each of those is worth real money and real peace of mind. The founder who tries to save on advisory fees at the SPA stage almost always pays far more later, either in a lower net price or in claims that surface after completion.

The document that turns a deal into reality

The share purchase agreement is not just paperwork to be endured at the finish line. It is the deal. The price, the risk you carry, the money you keep, and the freedom you have afterwards are all decided in its pages. Treat it with the seriousness it deserves.

Read it slowly. Disclose thoroughly. Negotiate the limitations hard. And lean on advisers who do this for a living, because you are doing it once and they are doing it every week. Get the SPA right and the exit you spent years building finally becomes real, on terms you can live with.

About Adam Graham

Adam Graham is a serial entrepreneur, CEO of JustFix, and creator of Exit Mode. He has built, scaled, and sold multiple companies, and now helps founders prepare their businesses for a successful and profitable exit.

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