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Enhancing Public Accountability: Key Elements of the Public Office (Accountability) Bill 2025
Kirsty Cook
In part 1 of our Anatomy of a Deal blog series, we explored the initial stages of the sale process. In part 2 , we now delve into the complexities of transaction documents, disclosure, and ancillary documents.
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Transaction documents
While the due diligence is ongoing, the solicitors will start preparing the binding documents required to implement the deal.
The main transaction document is the share purchase agreement (SPA), in which you agree to sell the shares in your company, and your buyer agrees to buy. It includes all of the key deal terms in fully fleshed-out form, such as the price calculation and how it will be paid, the parties' obligations on completion of the deal and protections for both you and your buyer.
This document is frequently subject to intense negotiation as it allocates the risk in the transaction and typically spans over 100 pages. The bulk of its content revolves around one of the primary contractual protections for your buyer: the warranties.
You make statements, known as warranties, regarding the shares, your ownership of them, and the company. For instance, a seller typically warrants that they legally own the shares, that the company's latest accounts are accurate, and that there is no actual, pending, or threatened litigation involving the company. If any of these warranties are untrue, you risk being sued by the buyer for breach of warranty.
A key part of our job on the deal is protecting you against such claims. There are three main things we will do to prevent any claims being brought against you: first, we will negotiate the wording of the warranties in the SPA to limit their scope and ensure they are clear so you can understand what you are being asked to confirm; second we will prepare a disclosure letter (as detailed in element 5 below) and third we will negotiate limitations on liability such as a minimum size of issue for claims to be brought and caps on liability.
These documents are long, complex and take a lot of work to finalise. We will be there to help you through this process, and make sure you understand what you are being asked to sign and where the key risks for you are.
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Disclosure
In the disclosure letter, you will disclose to your buyer any matter which would make a warranty untrue. If the matter has been adequately disclosed before completion of the deal, your buyer cannot sue you for the breach of warranty.
Disclosure letters come in two parts – the "front end", which includes general disclosures of matters your buyer could discover by doing online searches at Companies House or the Land Registry, and the "specific disclosures".
The specific disclosures are, as the name suggests, disclosures of matters which relate to your particular company. For example, there may be a warranty that your company has not entered any loan agreements or granted any security over its assets. Most businesses will have some form of secured bank finance, so we would disclose that by explaining in the specific disclosures what your finance arrangements are and referring to the copies of relevant documents in the data room.
While we will do as much heavy lifting as possible by extracting information from the due diligence replies/data room and asking for input from your accountants and tax advisors, this will inevitably require a lot of input from you as the seller and potentially members of your management team. This usually takes the form of a long Teams call before we prepare the first draft on which we will explain each warranty and ask questions to prompt you to think about issues you might not have previously considered. Fortunately, once the initial draft has been prepared, this process becomes a lot easier, but typically, your buyer will ask for additional information on a few issues, and there will be a bit of back-and-forth before the general disclosures in the front end are settled.
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Ancillary Documents
While the SPA and disclosure letter are the key deal documents, a whole host of other documents are required to implement the sale of your company – this will stretch from longer and more commercially important documents such as employment contracts or consultancy agreements if you are to stay involved in the business (whether for a short period or long-term) after completion, through to board minutes approving things like the transfer of the shares and change of directors, to short but vital ones like stock transfer forms, Companies House notifications and appointment and resignation letters.
Typically, your buyer's solicitors will draft these documents, but we will review them for you to ensure they tie up with the heads of terms (where relevant) and otherwise properly reflect the terms of the deal. They are usually not heavily negotiated and except where they relate to your personal arrangements going forwards won't usually require a lot of involvement from you.
In Part 3, we'll guide you through the final stages of the sale process, from exchange to post-completion considerations.
If you are considering selling your company, we’d be delighted to help you through the process. Please contact John Young or Krystina Tang.
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We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
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