The Transfer Agreement: What Should It Contain, and How Does It Differ From the Letter of Intent?

The transfer agreement — often called an SPA in English, "Share Purchase Agreement" or "Sale and Purchase Agreement" — is the document that legally executes the business sale itself. Where the letter of intent describes the parties' intent and the overall framework, the transfer agreement is the binding agreement building on that — often adjusted based on what due diligence has uncovered along the way.

What does a transfer agreement contain?

• The subject of the deal: Exactly what's being transferred — shares, interests or assets — and to what extent.
• The purchase price and payment terms: The final price, how and when it's paid, plus any earn-out or adjustment mechanisms.
• Warranties and representations: The seller's warranties about the business's affairs — finances, rights, contracts and employee matters — including that the seller genuinely owns and has the right to sell the business.
• Liability limitation: How long and to what extent the seller remains liable if a warranty later turns out not to hold — often time-limited and with a cap on the size of any damages.
• Takeover date (closing): The date the business actually changes owner, and what practically needs to happen on the day itself.
• Non-compete and non-solicitation clauses: Any restrictions on what the seller may do after the sale.
• Breach: What happens if one of the parties doesn't comply with the agreement.

How does it differ from the letter of intent?

The letter of intent is generally not binding for the transfer itself — it defines what the parties agree on, before the expensive due diligence process begins. The transfer agreement, by contrast, is fully binding and contains all the agreed terms from the letter of intent, plus the adjustments and clarifications that have emerged during due diligence and negotiation.

How is risk handled in the agreement?

Financial risks discovered late in the process are typically handled either by adjusting the purchase price itself, through specific price adjustment mechanisms in the agreement, or through warranties and an associated right to damages if something later turns out to be different from what was disclosed.

Who drafts the agreement?

Because the transfer agreement is a complicated type of agreement, and because no two businesses are alike, it's typically drafted jointly by the parties' lawyers. It's rarely a good idea to base such a central part of the deal on a generic template without legal review — particularly the warranties and liability limitation should always be tailored to the specific deal.

Need a transfer agreement drafted or reviewed? Under the Advisory & Mediation package, you get access to our lawyer network throughout the process — book a free, no-obligation call.