stellapenso
2 posts
Oct 08, 2026
1:22 AM
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I was reading about the share purchase agreement and had a question about how it works in practice, since most explanations just call it the main contract in a company sale without covering what is actually inside it. Here is what I understood from my reading, and I would appreciate anyone correcting me or adding context.
A share purchase agreement, often shortened to SPA, is the legal contract used when a buyer acquires the shares of a company from its shareholders. Because the buyer takes over the company itself, including its history, the agreement tends to spend a lot of its length on protecting the buyer against things they cannot fully see. The headline terms are the price and how it is paid, which can include a lump sum at completion, deferred payments, or an earn out tied to future performance, and many deals also include adjustments based on the company's cash, debt, and working capital at completion.
Warranties seem to be one of the most heavily negotiated parts. These are statements from the sellers about the state of the business, covering areas like accounts, tax, contracts, employees, and intellectual property, and if one turns out to be untrue the buyer may be able to claim damages. Sellers usually try to limit their exposure through caps on liability, time limits on claims, and disclosure against the warranties, which is a separate document listing known issues so they cannot later be the basis of a claim. Indemnities, which cover specific known risks, and restrictive covenants that stop sellers from competing or poaching staff after the sale, also appear often.
My question is how much of this is usually negotiated line by line versus accepted as market standard, and which clauses tend to cause the most friction between founder sellers and buyers, particularly around warranty limits and the treatment of deferred or earn out payments.
Has anyone here been through a share sale, as a seller, buyer, or adviser? Which parts of the agreement took the longest to settle, and what would you want first time sellers to understand before reading one?
Found a fairly clear explanation of this on E Entrepreneur Plus while I was reading around the topic, helped me understand the founder side of it a bit better.
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