When you buy unlisted shares, the price you agree on is only one part of the transaction. What actually protects your interests or fails to is the share purchase agreement for unlisted shares you sign. This document determines what shares are being transferred, who is selling them, the purchase price, payment conditions, seller representations, transfer conditions, and closing obligations. It also sets out what happens if either party doesn't fulfil their contractual obligations. Before you transfer any money, it's worth understanding what this agreement should actually contain.
A share purchase agreement (SPA) is a contract between a buyer and a seller that sets out the terms on which shares in a company will be transferred. It typically identifies the parties involved, the specific shares being sold, the purchase consideration, the conditions that must be met before the transaction completes, and the obligations each side has at closing.
For unlisted shares, this document matters more than it might for listed securities. On a stock exchange, a trade is standardised, cleared through an exchange mechanism, and settled through established systems. A private transaction in unlisted shares has none of that infrastructure. There's no exchange guaranteeing settlement, no standardised contract note, and no regulator matching buy and sell orders. The SPA is effectively the rulebook for that specific transaction.
This is also where an SPA differs from simply agreeing on a price through a broker or intermediary. A verbal or informal price agreement tells you what you'll pay it doesn't tell you what you're actually entitled to, what the seller is legally promising, or what recourse you have if something goes wrong. The SPA is meant to convert an informal understanding into an enforceable contract.
The SPA matters because it's the document that defines ownership clarity, transfer obligations, payment obligations, seller representations, conditions before completion, and remedies if either party doesn't meet its obligations. Without a properly drafted agreement, a buyer's position often rests on assumptions rather than enforceable terms.
That said, it's worth being clear-eyed about what an SPA actually does. A share purchase agreement for unlisted shares does not eliminate investment risk, and it does not replace company-level due diligence. It can define your contractual rights in a transaction, but it says nothing about whether the company itself is a sound investment, whether its financials are accurate, or whether the shares will appreciate in value. Those are separate questions that require separate research.
Before signing, buyers should review each of the following clauses carefully. The table below summarises what to look for and why it matters.
| Clause | What to Check | Why It Matters |
| Parties | Legal names and authority of buyer and seller | Confirms who is actually entering the transaction |
| Share Details | Number, class and relevant identification details | Establishes exactly what is being purchased |
| Purchase Price | Price per share and total consideration | Avoids ambiguity over the amount payable |
| Payment Terms | Timing, method and conditions of payment | Clarifies each party's payment obligations |
| Representations & Warranties | Seller's ownership and authority to sell | Provides contractual assurances about the shares |
| Conditions Precedent | Required approvals or documents before closing | Clarifies what must happen before the deal completes |
| Transfer Restrictions | Articles of Association, shareholder agreements, ROFR/ROFO | May affect whether the shares can be transferred at all |
| Closing | Documents and steps required to complete the transaction | Defines how and when the transaction is finalised |
| Indemnity | Covered losses and limitations on liability | Defines the contractual remedy if something goes wrong |
| Dispute Resolution | Arbitration clause or court jurisdiction | Establishes how disagreements will be resolved |
Before anything else, buyers should verify who they're actually transacting with. This means checking the seller's identity, their authority to sell the shares, and whether they genuinely own the shares being offered.
It's also worth checking whether the shares are subject to any encumbrance, a pledge, lien, or other restriction and whether the seller's contractual right to transfer the shares is clear under the company's governing documents. No single document automatically proves every aspect of ownership; this usually requires cross-checking multiple sources, including the company's shareholding records and, where available, statutory filings.
The SPA should clearly identify exactly which shares are being purchased. Vague descriptions create room for disputes later. Buyers should look for:
Transfer restrictions are often overlooked but can materially affect a transaction. A company's Articles of Association may require existing shareholders to be given the first opportunity to purchase shares before an outside buyer can step in, or may require board approval for any transfer. The SPA should be reviewed alongside these governing documents, not in isolation, since a purchase agreement cannot override restrictions that exist elsewhere in the company's constitutional framework.
These three terms come up in nearly every SPA, and it helps to understand what each one actually does.
Representations and warranties are statements or contractual assurances made by a party, usually the seller regarding specified facts or circumstances, such as their ownership of the shares or their authority to sell them. If a representation later turns out to be false, it can give the buyer contractual grounds to make a claim.
Indemnity is a contractual mechanism that may require one party to compensate the other for specified losses, subject to the agreed terms of the SPA. It's essentially a promise to make the other party whole if certain defined problems arise.
When reviewing these clauses, buyers should pay attention to:
It's worth being realistic here: these clauses don't guarantee recovery. They create a contractual pathway for a claim, but enforcing that claim particularly against an individual seller rather than a well-capitalised entity can still be practically difficult.
Most SPAs distinguish between conditions that must be satisfied before closing, actions or documents required at the point of closing, and obligations that continue after closing.
Conditions precedent might include obtaining necessary approvals, satisfying regulatory requirements, or receiving specific documents from the seller. Closing itself typically involves delivery of transfer documents, payment of the purchase consideration, and execution of any share transfer forms. Some obligations such as updating the company's register of members or filing relevant forms with the Ministry of Corporate Affairs may extend beyond the closing date itself.
It's worth noting that transaction processes vary considerably depending on the company, the nature of the shares, and the specific commercial arrangement. What applies to one unlisted-share transaction won't necessarily apply identically to another, so it's useful to read this section of the SPA as describing the specific steps for that particular deal rather than a universal template.
Payment terms deserve close attention because vague language here is a common source of disputes. Buyers should confirm the total purchase price, the price per share, the payment schedule, and any conditions attached to payment for instance, whether payment is contingent on certain documents being delivered first.
It's also worth checking what happens if payment is delayed, or if the transaction doesn't complete for some reason. Are there refund provisions? What are the consequences of non-payment or delayed completion for either party? An SPA that leaves these points unaddressed, or addresses them ambiguously, can leave both sides in an uncertain position if the transaction doesn't go smoothly.
Every SPA should specify how disagreements will be handled if they arise. This typically includes the governing law applicable to the contract, the jurisdiction where disputes will be resolved, and whether disputes go through arbitration or court proceedings. Buyers should also check notice requirements on how formal communications between the parties must be made along with termination rights and what happens if the agreement is terminated before completion.
These clauses are factual matters set out in the contract itself, and their practical effect can depend on the specific wording used and the broader legal context. For anything beyond a general understanding of these provisions, independent legal advice is the appropriate route rather than relying on general commentary.
Certain patterns in an SPA, or in how a transaction is being conducted, warrant closer scrutiny:
It's worth adding a caveat here: not every unusual clause indicates fraud or illegality. Negotiated terms can genuinely vary between transactions for legitimate commercial reasons. The point of this list is to flag areas that deserve closer questioning, not to suggest automatic red flags mean wrongdoing.
An SPA shouldn't be reviewed in isolation. Depending on the transaction, buyers may also want to examine:
The exact set of documents required depends on the transaction and the company involved, so this list is indicative rather than exhaustive.
| # | Item to Verify |
| 1 | Seller identity verified |
| 2 | Seller's authority to sell checked |
| 3 | Shares clearly identified (number, class, rights) |
| 4 | Ownership of shares verified |
| 5 | Transfer restrictions reviewed against Articles of Association |
| 6 | Purchase price confirmed |
| 7 | Payment terms understood |
| 8 | Conditions precedent understood |
| 9 | Closing process documented |
| 10 | Representations and warranties reviewed |
| 11 | Indemnity provisions understood |
| 12 | Termination provisions checked |
| 13 | Dispute resolution clause reviewed |
| 14 | Supporting documents examined |
| 15 | Independent professional advice considered where appropriate |
Reviewing a share purchase agreement for unlisted shares is an important part of transaction-level due diligence, but it's only one piece of a larger picture. It should be considered alongside company due diligence, share ownership verification, transferability checks, valuation assessment, and tax and regulatory considerations. A well-drafted SPA can clarify contractual rights and obligations, but it does not make an unlisted-share investment safe or guaranteed the underlying business risk of the company remains separate from the contractual risk of the transaction.
Supremus Angel publishes educational content like this to help serious buyers understand the transactional side of unlisted-share purchases before they proceed. This article is intended for general educational purposes and does not constitute legal, tax or investment advice; buyers are encouraged to consider independent professional advice before entering into any transaction.
1. What is a share purchase agreement for unlisted shares?
It's a contract between a buyer and seller that sets out the terms of a private transfer of unlisted shares, including the shares involved, the price, payment terms, and closing conditions.
2. Is an SPA required when buying unlisted shares?
There's no single rule that mandates an SPA for every transaction, but having a written agreement is generally considered important to establish enforceable terms, since unlisted transactions lack exchange-based settlement protections.
3. What should I check before signing an SPA?
Key areas include the seller's ownership and authority, share details, purchase price, payment terms, representations and warranties, conditions precedent, transfer restrictions, and dispute resolution provisions.
4. How can I verify the seller's ownership of unlisted shares?
This typically involves cross-checking company shareholding records, relevant corporate filings, and other ownership documentation; no single document conclusively proves ownership in every case.
5. What are representations and warranties in an SPA?
They are statements or contractual assurances made by a party, usually the seller, regarding specific facts such as ownership or authority to sell the shares.
6. What is an indemnity clause in a share purchase agreement?
It's a provision that may require one party to compensate the other for specified losses, subject to the terms, limits and conditions set out in the agreement.
7. Can transfer restrictions affect the purchase of unlisted shares?
Yes. Restrictions in a company's Articles of Association or existing shareholder agreements, such as rights of first refusal, can affect whether and how shares can be transferred.
8. What documents should be reviewed along with an SPA?
Commonly reviewed documents include the Articles of Association, shareholder agreements, ownership records, corporate filings, and available financial information, depending on the transaction.
9. Does an SPA eliminate the risks of buying unlisted shares?
No. An SPA can define contractual rights and obligations for the transaction, but it does not remove the underlying investment risk associated with the company or its shares.
10. Should a lawyer review an SPA before signing?
For a transaction of this nature, obtaining independent professional advice is generally advisable, particularly for reviewing representations, indemnities, and dispute resolution terms.
