The share purchase agreement (SPA): what it must contain

The company purchase agreement — called a share purchase agreement (SPA) in the case of share purchases — binds the parties on what is sold, at what price, with which warranties and under what conditions ownership passes. It is the document in which every weakness in the negotiating position materialises. Anyone who takes the SPA seriously only at the buyer's first draft negotiates uphill.

What is an SPA?

The share purchase agreement is the sale contract for company shares — the legal heart of a share deal. In an asset deal, the counterpart is called an asset purchase agreement (APA) and transfers individual assets instead of shares. Which route fits is a decision in its own right: Asset deal or share deal?

On form: the assignment of GmbH shares in Germany requires a contract concluded in notarial form (§ 15 Abs. 3 GmbHG); in Austria, § 76 GmbHG requires a notarial deed (Notariatsakt) for transfers between living persons, and also for agreements by which a shareholder undertakes to transfer. The form requirement also shapes the timetable when shareholders sell their GmbH. The SPA is therefore not an informal paper, but a notarial appointment with lead time. For contracts with a foreign element, the law firm Heuking (article of 13.07.2017) advises notarial recording at least for the GmbH part, because there is no supreme-court case law on the question of foreign local forms.

The framework for the price is set by a sound company valuation.

What does a company purchase agreement contain?

An SPA regulates six core areas: the object of sale, the purchase price and its mechanism, warranties and indemnities, conduct obligations until completion, completion conditions (closing conditions) and post-contractual obligations such as the non-compete. Everything else is the working-out of these six blocks.

Building block	Regulates
Object of sale	Which shares/assets pass, as of which reference date
Purchase price + mechanism	Amount, adjustments, earn-out, manner of payment
Warranties	What the seller stands behind — and for how long
Indemnities	Known risks (e.g. taxes) that the seller bears
Closing conditions	What must be fulfilled before completion (e.g. approvals)
Non-compete	What the seller may not do after the sale

Which purchase price mechanisms are there?

Two models dominate: with a locked box, the purchase price is fixed on the basis of a past reference-date balance sheet — simple, predictable, seller-friendly. With closing accounts, the price is adjusted after completion on the basis of a reference-date balance sheet, typically via net financial debt and working capital. Added to this are variable components such as the earn-out.

According to Rödl & Partner, with a locked box the price is already fixed at signing; the buyer's risk lies in outflows to the seller after the reference date, so-called leakage (for example dividends or transfers of assets). Agreed exceptions (“permitted leakage”) are reflected in the price; for impermissible outflows the seller is usually liable euro for euro within a review period after completion. The closing accounts variant, by contrast, delays the fixing of the price, because the reference-date balance sheet is only prepared after completion. M&A Review noted as early as 2016 that the locked box is the most frequently used closing mechanism in Europe; it also describes that the period between the reference date and payment is often compensated with an interest rate, for which flat rates of 3, 5 or 10 percent are sometimes agreed.

How cash and debt affect the price is explained in the article Net debt. The mechanics are not a formality: between locked box and closing accounts there are often noticeable differences in the result.

In an asset deal, the transfer of undertaking under § 613a BGB is added as a regulatory complex of its own.

An example: locked box with leakage (constructed)

The following numerical example is constructed and serves only as illustration; it does not describe a real case. Buyer and seller agree on a purchase price of EUR 10 million on the basis of the annual accounts as of 31.12., signing in March, completion at the end of June. In May the shareholders resolve a dividend of EUR 500,000, which is not provided for in the contract as a permitted outflow. Under the principle described above, the seller has to reimburse EUR 500,000 to the buyer — regardless of whether the amount was economically “right”.

If instead interest had been agreed between the reference date and completion, for example at 5 percent per year on the purchase price (purely illustrative), a surcharge of EUR 250,000 would result for half a year. The examples show why, before the first draft, the seller should know which payments are still planned until completion — shareholder withdrawals, bonuses, loan repayments — and have them included in the contract as permitted outflows.

What is the seller liable for?

Via the catalogue of warranties: the seller assures that accounts are correct, contracts exist, and no hidden liabilities or legal disputes exist. If a warranty breaches the truth, he owes damages — limited by a liability cap, de minimis thresholds and limitation periods, all of which are negotiable.

Two statutory reference points help with classification. First, claims for defects in sale law, unless a special period applies, become time-barred under § 438 Abs. 1 Nr. 3 BGB after two years; in a company acquisition, the limitation of warranties is usually agreed separately. Second, under § 444 BGB the seller cannot rely on an agreement that excludes or limits the buyer's rights because of a defect, to the extent he fraudulently concealed the defect or gave a guarantee as to quality. In practice this means: the more precisely the catalogue of warranties is worded, the more important it is what you disclosed beforehand. How far these provisions go in an individual case belongs in legal hands.

Two things defuse liability from the seller's perspective: a clean due diligence with complete disclosure — what has been disclosed can usually no longer be a breach of warranty — and, in larger transactions, a W&I insurance that shifts warranty risks to an insurer. According to a market report on Unternehmeredition.de, over 3,200 new W&I policies were concluded in Europe in 2025 (2016: 808), premium rates are around the 1 percent mark, and the historical claims notification rate is 12.46 percent. Whether the insurance is worthwhile for your transaction depends on size, risk profile and exclusions; this is not a blanket recommendation.

From LOI to signed SPA

The SPA does not fall from the sky: its key points — price basis, mechanism, scope of warranties — are ideally fixed already in the letter of intent. What remains open there is negotiated against you after the due diligence. Signing and closing (completion) often fall apart, for example when approvals are outstanding.

That this process also works cross-border is shown by the transaction guided by IGCP, net-haus -> SINGU (Poland, 2025).

Five questions before the first draft

1. Which mechanism is laid down in the LOI, locked box or closing accounts?
2. Which payments to shareholders are still planned until completion, and are they recorded as permitted outflows?
3. Which warranties do you give, with what cap, from which de minimis threshold and with what limitation period?
4. Which known risks (taxes, disputes) are disclosed so that they do not become a warranty claim?
5. Who records the deed, and do the date and completion conditions fit the realistic timetable?

Frequently asked questions

Who drafts the company purchase agreement?

An M&A-experienced lawyer — contract drafting is legal advice and belongs in legal hands. The M&A advisor negotiates the commercial points (price, mechanism, key warranty parameters) and maintains process pressure; the two roles interlock.

How long do the SPA negotiations take?

From the first draft to signature usually four to eight weeks — in parallel with the last phase of the due diligence. The entire sale process takes 6 to 12 months in the market; run in a structured way, 3 to 6 months are achievable.

What is the difference between an LOI and an SPA?

The LOI is a largely non-binding declaration of intent before the due diligence; the SPA is the binding purchase agreement afterwards. Rule of thumb: in the LOI you negotiate from the strongest position — what is stated there usually holds through to the SPA.

What does leakage mean in a company acquisition?

Leakage denotes outflows from the company to the seller or related persons after the reference date of a locked box, for example dividends or transfers of assets. Outflows that were not agreed usually have to be reimbursed by the seller to the buyer.

Warranties, indemnities, closing conditions — the contract terms are defined in the M&A glossary.

A company sale is the most important transaction of an entrepreneur's life. Get independent and discreet support — IGCP Capital Partners. → igcp.at

How the agreed company value becomes the amount actually paid out is shown in Purchase price mechanics in a company sale.

If the company is over-indebted, separate rules apply: Selling a GmbH with debts.

This article does not replace legal advice. Status of the details and sources: 30 September 2026.