Selling shares in a company: The legal timeline

Selling shares in a company involves several legal requirements that must be handled carefully.

The key legal steps for selling company shares include non-disclosure agreements, heads of terms, due diligence, share purchase agreements, disclosure letters, ancillary documents, completion and post-completion matters.

Here we explain what each stage involves.

Key steps for selling company shares

Non-disclosure agreement (NDA)

The journey begins by protecting sensitive information with a non-disclosure agreement (NDA). This legal step ensures that confidential details shared during the sale process remain private.

Heads of terms

The heads of terms play a pivotal role in establishing a mutual understanding between the buyer and seller. While the heads of terms are not typically legally binding in their entirety they play a strategic role in the negotiation phase.

In the drafting of the heads of terms, several key components are included to lay down the groundwork for a seamless negotiation and transfer of ownership. This includes:

  • Identification of parties
  • Sale price
  • Assets included
  • Payment structure
  • Confidentiality
  • Exclusivity
  • Conditions precedent
  • Timelines
  • Dispute resolution

Due diligence

Due diligence is where the buyer and their solicitor meticulously review everything from financial records and legal contracts to customer and vendor relationships. This essential phase is about transparency and may influence the final terms or price of the sale.

Share purchase agreement (SPA)

The drafting of the share purchase agreement (SPA) is a central part of the process. It’s the definitive contract that sets out all of the terms of the transaction, including the price, conditions, warranties, and indemnities.

This document undergoes rigorous negotiation to balance the interests of both buyer and seller before it’s finalised and signed.

Disclosure letter

The disclosure letter allows the seller to provide detailed information to support the warranties in the share purchase agreement, effectively declaring the company’s actual state and any potential liabilities to the extent that this may be inconsistent with the warranties.

This process is crucial for transparency and protecting the seller from future legal claims by the buyer for undisclosed issues. It establishes a clear record that aims to prevent post-sale legal disputes over the business’s condition at the time of sale.

Ancillary documents

Ancillary documents cover all additional agreements and procedural details necessary to implement the share transfer.

Examples include board minutes of both the buyer and seller companies to approve the sale and purchase, stock transfer forms, resolutions of the companies and director resignation letters.


Exchange and completion may occur simultaneously or separately. This part involves the formal signing of the SPA and the transfer of ownership, often accompanied by payment.

Post completion matters

Post-completion involves tying up loose ends, such as regulatory filings or adjusting payments if the final valuation of the company changes.


Selling shares in a company is a multilayered legal journey that requires precision at each stage. It’s not just about the initial agreement or the final handshake; every step plays a crucial role in the transaction’s success.

Rubric specialises in share sales and acquisitions. Our team of corporate lawyers is here for you through every stage whether you‘re buying or selling shares.

Please get in touch with us today if you’re seeking legal advice.

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