A share purchase changes the owners of a company rather than transferring each of its business assets individually. That continuity can be valuable. It also makes understanding the company’s history essential: liabilities do not disappear merely because its shareholders change.
Check the shares and the sellers
Establish the company’s identity, share classes, rights and ownership records. Reconcile the proposed sale with its register of members, certificates, articles and shareholder arrangements. Ask about options, convertible funding, security over shares and restrictions on transfer. A company search is a useful starting point, not a substitute for investigating title.
Test the commercial assumptions
Break the purchase case into questions. How much of the reported profit depends on the owner working without a market salary? What happens if a major customer leaves? Does a change of control require a landlord, lender or customer’s consent? Which assets or services are supplied by another company in the seller’s group?
Give these questions to the relevant advisers and request supporting evidence. Track unresolved points rather than treating a large data room as a completed investigation. Read our due diligence process guide for a practical way to organise the work.
Understand what the agreement actually protects
A share purchase agreement allocates the parties’ obligations and risks. Price adjustments, warranties, indemnities, limitations, conditions and any deferred consideration need to fit the deal. Disclosure may qualify warranty protection. Do not assume that an inaccurate warranty automatically gives a right to terminate, or that every loss will be recoverable.
Before signing, ask your solicitor to explain the remedies, deadlines, financial limits and remaining exposure in plain language. Keep that explanation beside the final decision paper.
Plan signing and completion separately
Signing and completion may occur together or at different times. Your advisers should prepare a completion agenda identifying payments, documents, consents, releases and responsibility for company records. Escrow is one possible arrangement, not a universal requirement.
Budget for applicable share transfer taxes and check the particular transaction with your adviser. After completion, follow through on registrations, certificates, access to business systems and the seller’s handover. The share purchase agreement explainer supports understanding; it is not a ready-to-sign acquisition contract.
Sources and further reading
General information for England and Wales. Your circumstances may require legal, tax, financial or other professional advice.
Your next practical step.
Check the contents and scope of the documents relevant to this topic.
Due diligence planning pack
Organise information requests and track matters for the buyer’s professional advisers to investigate.
See contents and suitability
Acquisition preparation workbook
Plan the acquisition process, record screening decisions and prepare a clear brief for professional advisers.
See contents and suitability