Share Purchase Agreement (SPA)

Use when drafting a share purchase agreement (SPA) for a sale of shares in a private company, whether in a simple bilateral transaction or a structured M&A deal with earn-outs, escrow, and multiple parties. Covers the full SPA structure including representations and warranties, indemnification caps and baskets, conditions precedent, pre-closing covenants, and tax provisions. Addresses MENA-specific considerations including foreign ownership rules, regulatory approvals, and civil-law vs common-law warranty regime differences.

Share Purchase Agreement (SPA)

A share purchase agreement transfers legal and beneficial ownership of shares from seller(s) to buyer(s). Unlike an asset deal, the buyer acquires the target company with all its history — including undisclosed liabilities — making the representations, warranties, disclosure process, and indemnification regime the most commercially sensitive elements of any SPA.

When to use this

Acquisition of a controlling or minority stake in a private company
Management buyout or buy-in
Private equity investment structured as a share acquisition
Secondary sale by a financial investor
Acquisition of a MENA subsidiary by a foreign strategic buyer
Part of a wider group reorganization

Required inputs

Input	Why it matters	Default
Seller(s) — names, ownership percentages	Determines who signs, who warrants, and who receives proceeds	Must provide
Buyer(s)	Identifies the acquiring entity; affects regulatory approval requirements	Must provide
Target company	Full legal name, registration number, jurisdiction	Must provide
Shares being sold — number, class, % of capital	The subject matter of the agreement	Must provide
Consideration structure	Cash / shares / mix / earn-out; affects tax treatment and mechanics	Must provide
Closing mechanism	Simultaneous sign-close or signing-to-closing gap with conditions precedent	Simultaneous unless regulatory or third-party approvals required
Governing law	Affects warranty construction, limitation periods, implied terms	DIFC / English law for cross-border MENA deals; Delaware for US-side

Optional inputs

Representations and warranties insurance (W&I insurance) — changes indemnification structure
Earn-out metrics and calculation methodology
Escrow amount, period, and release conditions
Management retention arrangements
Transition services agreement (TSA) parameters

Document Structure

1. Definitions and Interpretation

Define all key terms. Note that civil-law jurisdictions (LB, UAE onshore) may interpret "best efforts" differently from common-law. Defined terms should include: Business Day, Material Adverse Change, Closing Date, Completion, Consideration, Earn-Out, Fundamental Warranties, Locked Box Date (if applicable).

2. Sale and Purchase

The operative transfer clause: Seller sells; Buyer buys; Consideration is the purchase price. Include:

Share description (share certificates, class, number)
Free of all encumbrances (important warranty — title is clean)
Consideration mechanics:
- Cash at close: straightforward; needs wire instructions and escrow mechanics
- Locked box: price fixed at a historical balance sheet date; Seller warrants no "leakage" between the locked box date and closing; simpler for Seller
- Working capital adjustment: price adjusted post-close to reflect actual working capital at close vs agreed target; more complex; standard in US/UK deals
- Earn-out: deferred portion tied to post-closing performance (revenue, EBITDA, milestones); requires careful drafting of earn-out covenants to prevent Buyer from deliberately depressing earn-out metrics

3. Conditions Precedent

Conditions the closing depends on:

Regulatory approvals (competition clearance, foreign investment approval — UAE CBUAE, ADGM FSA, KSA CMA, etc.)
Third-party consents (material contracts with change-of-control clauses)
Shareholder approvals (if target is a large company)
Employee key-man retention
Due diligence sign-off (if closing is not simultaneous with signing)
No Material Adverse Change (MAC) — define MAC carefully: MENA courts may interpret it narrowly unless specifically defined

4. Pre-Closing Covenants

From signing to closing:

Operate in the ordinary course of business (negative covenants: no new material contracts, no capital expenditure above threshold, no new indebtedness, no M&A, no change to key terms of employment)
No leakage (in locked-box structure): no dividends, management charges, transactions with related parties outside agreed parameters
Provide access for Buyer's due diligence confirmation
Notify Buyer of any MAC event

5. Closing Actions

Simultaneous deliveries at closing:

Seller delivers: share certificates (or transfer form), resignation letters from directors, board resolution approving transfer, statutory books
Buyer delivers: wire transfer confirmation / completion payment, executed ancillary documents

6. Representations and Warranties

The warranty schedule is the most negotiated element. Organize by category:

Category	Key warranties	Typical survival
Fundamental	Title to shares (no liens), capacity, authority, no conflict with third-party rights	Uncapped or full consideration cap; survives until statute of limitations
Corporate	Valid existence, no insolvency proceedings, articles / bylaws compliance	24–36 months
Financial statements	True and fair; prepared in accordance with applicable GAAP/IFRS; no undisclosed liabilities	24–36 months
Tax	No outstanding tax disputes; returns filed correctly; no unpaid tax liabilities; transfer pricing arrangements at arm's length	7 years (aligns with most MENA tax limitation periods)
Intellectual property	Ownership of IP; no infringement of third-party IP; IP agreements current and enforceable	36 months
Employees	No outstanding employment disputes; EOSG/EOSA fully provided; no undisclosed severance commitments	24 months
Material contracts	Listed and current; no breach; no change-of-control triggers	24 months
Real estate	Good title or valid leasehold; no undisclosed encumbrances	36 months
Litigation	Disclosed litigation and regulatory proceedings only; no undisclosed threatened claims	24 months
Compliance / regulatory	No sanctions violations; no bribery (FCPA / UK Bribery Act / KSA Anti-Bribery Law applicable)	36 months
Environmental	No material environmental liability	36–60 months

7. Disclosure Schedule

The Seller's right to qualify warranties. The Disclosure Schedule is structured to track the warranty schedule clause by clause, with specific disclosures against each warranty. General disclosures (constructive knowledge of public records) are common in UK deals but resisted by Buyer's counsel. See [[draft-schedule-annex-builder]] for disclosure schedule structure.

8. Indemnification

Parameter	Typical range	Notes
General indemnification cap	10–25% of consideration	Below fundamental warranties cap
Fundamental warranties cap	100% of consideration or uncapped	Fraud, title, capacity
Tax indemnity cap	Full consideration or uncapped	Tax indemnity is often separate from general warranties
De minimis per claim	0.1–0.25% of consideration	Claims below this threshold not brought
Aggregate basket / threshold	0.5–1.5% of consideration	Seller only liable once aggregate losses exceed this (tipping basket) or only for excess above (retention basket)
General warranty survival	18–36 months from close	From closing date
Tax warranty survival	7 years	Matches most applicable limitation periods
Fundamental warranty survival	Statute of limitations	10–15 years in civil-law systems

9. Specific Indemnities

Known issues identified in due diligence (pending litigation, regulatory investigations, environmental cleanup, unresolved tax disputes) are ring-fenced as specific indemnities outside the general warranty cap and basket.

10. Tax

Pre-closing taxes: Seller responsible for all taxes for periods ending before closing
Post-closing taxes: Buyer responsible
Straddle periods: apportioned based on the period before and after the closing date
Transfer taxes on the share acquisition (stamp duty, registration fees): Buyer typically bears

11. Restrictive Covenants on Seller

Non-compete: Seller shall not engage in a competing business; typically 2 years; geographic scope tied to where the Target operates
Non-solicitation of employees and customers: 2 years
Carve-outs: passive investment (<3–5%), employment by a competitor that was pre-existing

12. Termination Rights

Mutual: any time before closing by written agreement
Material Adverse Change: Buyer may terminate if MAC occurs and is not waived
Regulatory failure: if conditions precedent not satisfied by longstop date
Material breach: if a party materially breaches its representations or pre-closing covenants and the breach is not cured within a notice period

13. Governing Law and Dispute Resolution

Arbitration preferred for cross-border transactions (DIAC, ADGM, LCIA, ICC)
For DIFC / ADGM deals: DIFC/ADGM courts or ADGM Small Claims have good enforcement track records
Choice of law: English law standard for DIFC/ADGM; KSA law for domestic KSA deals; Lebanese law for LB deals

14. Boilerplate

Entire agreement, amendment, assignment (Buyer may assign to an acquisition vehicle; Seller may not assign warranty claims), waiver, severability, notices, costs (each party bears own costs), counterparts.

MENA-Specific Considerations

Foreign ownership restrictions

UAE: Federal Decree-Law 26/2020 increased FDI permissible to 100% ownership in most sectors; strategic sectors (defense, banking, insurance, media, telecom) require CBUAE / UAE Cabinet approval
KSA: Foreign Investment Law and the National Investment Strategy permit FDI in most sectors; specific sectors (oil production, real estate in Mecca/Medina, security) restricted; MISA approval required
LB: Foreign ownership in Lebanese companies is generally permitted; restrictions in media, real estate (special rules apply)

Arabic language and civil notarization

In UAE-onshore, KSA, and Lebanon, the SPA or its certified translation may need to be notarized (Tawqi3i) for registration at the relevant commercial registry. A share transfer must be registered with the relevant Ministry of Economy or commercial registry to be effective against third parties.
DIFC / ADGM: no Arabic requirement; English document; registration with DIFC / ADGM registrar of companies.

No common-law rep & warranty insurance market in MENA onshore

W&I insurance is available for transactions governed by DIFC / ADGM / English law and handled through London or Dubai market. For UAE onshore and KSA transactions, W&I insurance is developing but not yet fully market standard.

Common Mistakes

Signing without completing the disclosure schedule — incomplete disclosure leaves Seller with full warranty exposure
Earn-out covenants too thin — Buyer can depress earn-out by changing accounting policies or allocating overhead; need detailed earn-out covenants and independent calculation rights
Working capital definition disagreement at closing — definition of working capital (current assets minus current liabilities; what is included/excluded) should be agreed at signing with a sample calculation
Missing change-of-control consents — material contracts may terminate automatically or give the counterparty a termination right on a change of control; these must be identified in due diligence and consents obtained before closing
Tax — permanent establishment created by acquisition process — Buyer's due diligence team operating in a jurisdiction can inadvertently create a PE; manage carefully
Ignoring EOSG/EOSA provisions — in MENA acquisitions, the target company's EOSG/EOSA liability for employees is a real financial liability; verify whether it is fully provisioned on the balance sheet or separately funded