How to Review a Share Purchase Agreement: a Clause-by-Clause Checklist

What a share purchase agreement does, and how to read it A share purchase agreement (SPA) is the contract under which a buyer acquires the shares of a company from its existing shareholders. Because the buyer takes the company as a whole, it inherits everything the company owns and everything it owes, including liabilities nobody has mentioned yet. That single fact drives the whole document. Most of an SPA exists to tell you what you are really buying (the warranties), to shift the risk of nasty surprises (the indemnities and the disclosure letter), and to control the gap between signing and completion. Review it in that order and it stops feeling like a wall of boilerplate. This article is general guidance, not legal advice. The law here varies by jurisdiction, so have a qualified professional review your specific deal before you rely on it. ## The clause-by-clause checklist ### 1. Parties, recitals and definitions

Confirm the sellers named are the actual registered holders of every share being sold, and that the share numbers add up to what you think you are buying. Read the definitions early, because terms like "Completion", "Material Adverse Change", "Disclosed" and "Warranty Claim" are defined once and then carry the real weight of the deal. A narrow definition of "Disclosed", for example, quietly widens the seller's protection. ### 2. Sale and purchase, and the consideration Check what is being sold (usually the entire issued share capital, free of encumbrances) and how the price is set. Watch for a completion-accounts or locked-box mechanism. A locked-box fixes the price at an earlier balance-sheet date and bans "leakage" of value to the sellers after it; completion accounts adjust the price after closing. Make sure any earn-out is defined by a measurable metric, not a vague one. ### 3. Conditions precedent These are the things that must happen before completion, such as regulatory or competition clearances, third-party consents, or change-of-control approvals. Check who must satisfy each one, by when, and what happens if a condition is not met by the long-stop date. A buyer wants the right to walk away; a seller wants certainty of closing. ### 4. The gap: signing to completion If signing and completion are not simultaneous, review the conduct-of-business covenants that restrict what the sellers may do with the company in between, and any Material Adverse Change clause that lets the buyer exit if something serious happens. A seller should resist a broad, subjective MAC clause. ### 5. Warranties Warranties are statements of fact about the company (accounts, tax, litigation, employees, contracts, property, IP, compliance). As a buyer, press for them to be given at both signing and completion and to be comprehensive. As a seller, you will want to qualify many with "so far as the Sellers are aware" and to limit that awareness to named individuals after reasonable enquiry. A breach of warranty is a claim for damages, so the warranty schedule is where most of the risk sits. ### 6. Limitations on liability This is the most negotiated schedule. Check the financial limits: the overall cap (often a percentage of the price, with fundamental warranties such as title capped higher or at the full price), the basket or threshold before any claim can be brought, the de minimis per-claim floor, and the time limits for bringing claims (commonly 12 to 24 months for general warranties and longer for tax). Fraud is normally carved out of all limits. If any number here is missing, that is a red flag. ### 7. Tax covenant or tax deed Tax is usually dealt with separately, often as a covenant to pay (a pound-for-pound indemnity) for pre-completion tax liabilities. Confirm it exists and that its time limit matches the local limitation period for tax. ### 8. Indemnities Specific indemnities cover known or feared risks found in due diligence (a live dispute, an environmental issue, a title defect). Unlike a warranty, an indemnity is a promise to reimburse the loss pound for pound without the usual damages hurdles. Make sure each identified risk has its own indemnity. ### 9. Restrictive covenants Non-compete and non-solicit covenants stop the sellers from rebuilding the business they just sold. For them to be enforceable they must be reasonable in scope, geography and time; an overbroad covenant can be struck down entirely, which varies by jurisdiction. ### 10. Boilerplate that still matters Entire-agreement, notices, governing law, jurisdiction and the set-off position are not filler. The entire-agreement clause can shut out pre-contract promises, so check nothing you relied on lives only in an email. ## Red flags to stop on - Warranties almost entirely qualified by knowledge, or knowledge pinned to no named person.

• A disclosure letter that "generally discloses" everything in the data room, which can neutralise the warranties wholesale.
• A cap, basket or time limit left blank or set at an extreme.
• No specific indemnity for a risk that due diligence clearly flagged.
• A locked-box with weak leakage protection, or completion accounts with no dispute mechanism. ## A note on jurisdiction SPA structure is broadly similar across common-law markets (UK, Ireland, Singapore, Australia, India), but the detail differs. Share transfers in India attract stamp duty and must respect the Companies Act, 2013 and, for non-residents, FEMA pricing and reporting rules. In the UK the Companies Act 2006 governs the mechanics of transfer. Competition or foreign-investment clearances can be conditions precedent in any market. Treat the checklist as the shape of the review and confirm the local-law points with counsel. ## Where one contract workspace helps A share purchase agreement is only the start. After completion you live with the warranties, the indemnities, the covenant time limits and the post-completion obligations for months or years, and the risk is scattered across a long document and its schedules. Drafting an SPA, reviewing its warranties and limitation schedule, tracking the time limits and completion obligations, and governing the deal long after signing can all live in one AI workspace tuned to how your company buys and sells businesses. That is the thinking behind a workspace such as Adira.