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Share and Asset Purchase Agreements – Your Practical Legal Guide

Updated: Jul 20, 2022

Business purchases are complex in nature and so, it is always important to understand what sort of business transaction you are entering into. In this article, we will explain the difference between a Share Purchase Agreement (SPA) and an Asset Purchase Agreement (APA) by addressing four key questions:

1. What is a Share Purchase Agreement?

2. What is an Asset Purchase Agreement?

3. What are the similarities and differences between the two?

4. What are the advantages and disadvantages of each?

What is a Share Purchase Agreement? (SPA)

An SPA is an agreement setting out the terms and conditions relating to the sale and purchase of shares in a company. This occurs when all shares in a company are purchased, and ownership of the whole business is transferred to the buyer. This means that the buyer would inherit all existing profits, responsibilities, and liabilities, including business risks. In short-form- when someone enters into a SPA, the buyer acquires all the shares and assets of that company.

The Share Purchase Agreement is the document that legally binds this transaction and ensures that the seller discloses their accounts, tax liabilities, contracts with third parties, etc., to allow the buyer to carry out Due Diligence checks on the company that they are purchasing. This is to ensure that the buyer is aware of all risks, burdens, liabilities, and assets of the company.

What is an Asset Purchase Agreement?

An APA is the transfer of certain activities or assets related to a business and does not include the sale of the business as a whole. For example, an APA will facilitate the transfer of goodwill, machinery, stock, premises, creditors, debtors, know-how and intellectual property, i.e., the assets of the company.

With an APA, the buyer is able to choose which assets they wish to acquire from the company. It must also be ensured that each asset is transferred in accordance with the specific form of transfer required for that asset.

Further, it is also important to mention the transfer of contracts. All contracts that are related to the business should be transferred. Further, if the buyer wants to take on the current employees of the business, then they would have to ensure that the transfer complies with the Transfer of Undertakings (Protection of Employment) (TUPE).This is an essential element of transferring employees and can be a lengthy process but ultimately has been set in stone to protect employees from being made redundant/dismissed when a business (or part of a business) is sold.

What are some similarities and differences between an SPA and an APA?


1. The biggest difference is that an SPA is the sale of all shares, and an APA is the sale of selected assets. Therefore, they are both different transactions and have different procedures.

2. With a SPA, all shareholders in the company must be consulted and agree to sell their shares in the company.

3. On a share sale, there is no change of employer. With an APA, the application of TUPE must be considered which ensures that the transfer does not operate to terminate contracts of employment.


1. Both APA’s and SPA’s require Due Diligence checks to be undertaken to ensure that the buyer will not be burdened with any onerous liability.

2. Both an APA and SPA may require a grant/assignment of a Lease if the buyer also acquires the premises when purchasing the shares/assets of a business.

3. A lot of the terms that exist in a Share Purchase Agreement also exist in Asset Purchase Agreements, showing that there are some similarities within the documents themselves.

What are the advantages and disadvantages of a SPA and an APA?

Share Purchase Agreement

Some Advantages:

  • You acquire the whole of the business.

  • The process is simpler with an SPA.

  • Employment contracts are not affected as there is no change of employer.

  • The business as a whole is not affected and can continue to operate smoothly.

Some Disadvantages:

  • All liabilities of the company remain with the company and become the responsibility of the buyer which presents a certain degree of risk with SPA’s.

  • Share sales can sometimes take a longer amount of time to complete.

  • As the buyer will acquire all of the assets and liabilities of the company, Due Diligence checks may be lengthier and more intrusive.

Asset Purchase Agreement

Some Advantages:

  • The main advantage is that you do not have to purchase the whole of the business. You are able to choose which assets you would like to purchase, and this flexibility is favoured by buyers.

  • The sale may be completed more quickly as there will be less Due Diligence for the buyer to perform (depending on what assets they wish to acquire).

Some Disadvantages:

  • Each item must be transferred in accordance with its proper rules and made enforceable against third parties. This means that third parties will be liable if there are criminal/financial liabilities.

  • Contracts may be non-transferrable or unique to the seller.

  • The application of TUPE means that all employees must be taken on by the buyer with the same terms enjoyed before the sale.

How Can Pure Business Law Help?

If you are a business or an individual who wants to find out more about Share Purchase Agreements and Asset Purchase Agreements, please contact us and book a consultation with one of our expert Business and Commercial Law Solicitors. We are specialist Business Purchase Solicitors based in Bedford and London and operate nationally.

Our highly experienced Business and Commercial solicitors can advise you on all business matters, including Share and Asset Purchase Agreements.

If you would like to discuss anything raised in this article, please contact us, and speak with one of our solicitors. Pure Business Law is regulated by the Solicitors Regulation Authority and is a licensed member of the Law Society of England and Wales.

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