What Does a Lawyer Review and Negotiate for a Buyer Before Signing a Share Purchase Agreement?

Before a buyer signs a share purchase agreement, its lawyer should be doing more than proofreading clauses.

The lawyer’s job is to translate the commercial deal and due-diligence findings into binding protections: what exactly the buyer acquires, what it pays, what must happen before completion, what the seller is promising, what happens if those promises are wrong, and what documents actually transfer control at closing.

For an active buyer, the most useful legal review is therefore not a clause-by-clause list of comments. It is a transaction risk map that changes the SPA where the deal requires it.

For the document itself, see our guide to share purchase agreements in Malaysia.

1. Confirm the deal before reviewing the document

The first legal question is not whether clause 12 is acceptable. It is whether the SPA reflects the transaction the buyer thinks it is doing.

Buyer's counsel should confirm:

• the identity of the seller or sellers;

• the target company and group perimeter;

• the percentage and class of shares being acquired;

• whether the buyer is taking 100%, control or a minority stake;

• the agreed purchase price and payment structure;

• whether shareholder loans are included;

• the intended signing and completion timetable; and

• any conditions already agreed in a term sheet or heads of agreement.

An SPA cannot be reviewed properly if the transaction assumptions are still implicit.

2. Check whether the shares can actually be transferred as proposed

The legal review should confirm the company’s constitutional and corporate position, including relevant share rights, transfer restrictions and required approvals.

SSM’s current Companies Act materials continue to recognise a formal instrument-of-transfer framework under section 105. The transaction also has to work with the company’s register, constitution, existing shareholder arrangements and any restrictions affecting the shares.

A buyer should not reach completion with a signed commercial agreement but unresolved corporate mechanics preventing the agreed ownership position from being implemented.

3. Make due diligence change the SPA

A due-diligence report that never changes the acquisition agreement is usually incomplete as transaction work.

If diligence finds a problem, counsel should classify it and decide whether it belongs in:

• a price adjustment;

• a condition precedent;

• a specific indemnity;

• a warranty;

• a pre-completion covenant;

• retention or escrow;

• a post-completion obligation; or

• a recommendation not to proceed.

For the underlying investigation process, see our guide to due diligence in M&A and business transactions.

4. Review the purchase price mechanism

Buyer's counsel should understand how the commercial price becomes a legally payable amount.

The SPA may need to address:

• fixed consideration;

• completion accounts;

• cash/debt adjustments;

• working-capital adjustments;

• locked-box leakage protection;

• deferred consideration;

• earn-out mechanics;

• retention; or

• escrow.

The lawyer should coordinate with the buyer’s financial and tax advisers where the calculation depends on accounting or tax assumptions. Legal drafting should not silently invent financial mechanics that the buyer’s deal team has never agreed.

5. Identify what must happen before the buyer is forced to complete

Conditions precedent should be tied to actual transaction dependencies.

These may include:

• regulatory approval;

• change-of-control consent;

• financing;

• release of security;

• restructuring steps;

• shareholder or board approvals; or

• resolution of a critical due-diligence issue.

Buyer's counsel should also negotiate the long-stop date, who is responsible for satisfying each condition, the required level of effort, evidence of satisfaction and termination consequences if a condition fails.

6. Negotiate the period between signing and completion

If completion is delayed by approvals or other conditions, the buyer needs the target to remain substantially the business it agreed to buy.

Interim covenants can restrict material actions outside the ordinary course while still allowing management to operate normally.

Counsel should identify which actions genuinely require buyer consent rather than importing a generic list that paralyses the company.

7. Build a warranty package around the target, not a precedent

Warranty schedules should be tailored to the business and the diligence findings.

A regulated healthcare target, a software company and a manufacturing group do not present the same legal risk.

The review should consider areas such as corporate status, accounts, tax, contracts, employment, intellectual property, litigation, compliance, property and industry-specific licences where relevant.

The seller’s disclosure regime is equally important because properly disclosed matters can qualify the warranties.

For the wider framework, see warranties in a share purchase agreement.

8. Separate known risks from general warranty risk

If diligence has already identified an exposure, the buyer-lawyer should not automatically leave it inside a general warranty schedule.

A known tax investigation, pending claim, regulatory breach or specific contractual exposure may require a tailored indemnity or another economic protection.

The lawyer should also negotiate who controls third-party claims, settlement rights, mitigation and how any insurance or other recovery interacts with the seller’s liability.

9. Test the seller’s liability limitations against the buyer’s real exposure

The SPA will usually contain limitations on seller liability.

These can include:

• financial caps;

• de minimis thresholds;

• claim baskets;

• time limits;

• knowledge qualifiers;

• exclusions for matters disclosed or provided for in accounts;

• mitigation obligations; and

• rules against double recovery.

Buyer's counsel should not negotiate these in isolation. A low cap may be acceptable for some general warranties but inappropriate for title to shares, fraud or a specifically identified material exposure, depending on the transaction.

10. Make completion a controlled handover

The completion schedule should identify the documents and actions that put the buyer in control.

Depending on the deal, that can include:

• executed share-transfer instruments;

• share certificates or agreed evidence;

• board/shareholder resolutions;

• director appointments and resignations;

• statutory register updates;

• bank mandate changes;

• release of security or guarantees;

• corporate books and records;

• key contracts, passwords and access credentials; and

• documents implementing shareholder-loan treatment.

The lawyer should reconcile the completion list against the corporate and commercial due diligence so nothing important is assumed to “follow later”.

11. Review escrow, retention or deferred consideration where recourse needs security

If the buyer has negotiated seller recourse, counsel should ask whether the seller will still be financially capable of satisfying a claim after receiving the purchase price.

Where appropriate, part of the consideration can be retained, escrowed or deferred.

The documentation then needs clear claim, release, dispute and expiry mechanics.

12. Deal with post-completion obligations before signing

Some obligations only arise after the buyer takes control.

These may include:

• regulatory or corporate filings;

• transition support;

• customer or supplier introductions;

• completion accounts;

• release of retained consideration;

• tax cooperation;

• litigation cooperation; or

• post-completion restructuring.

For the wider closing sequence, see our guide to completion and post-completion integration in Malaysian M&A.

What should the buyer give its lawyer?

The legal review is faster and more commercially useful when the buyer provides the full deal context early.

Useful materials include:

• term sheet or heads of agreement;

• latest SPA draft;

• group structure and cap table;

• due-diligence reports and red-flag summaries;

• financial model and agreed price mechanics;

• key regulatory/third-party approval list;

• buyer investment-committee conditions;

• financing requirements; and

• the buyer’s non-negotiable commercial positions.

Red flags before signing

• The buyer cannot explain how the purchase price is calculated.

• Material due-diligence issues are not reflected anywhere in the SPA.

• Critical approvals are described only as generic “necessary consents”.

• The disclosure regime deems the whole data room disclosed without an agreed standard.

• The seller has broad liability exclusions but the buyer has no security for known risks.

• The buyer is acquiring less than 100% but ongoing governance has not been agreed.

• Completion deliverables do not actually transfer practical control.

• The buyer is expected to sign while material diligence remains open and there is no contractual protection for what may emerge.

Frequently asked questions

Can a lawyer review only the SPA without doing due diligence?

Yes, if that is the agreed scope, but the lawyer should know what diligence has or has not been done. SPA protections cannot be tailored to risks nobody has investigated.

How early should buyer's counsel be involved?

Ideally before binding commercial terms harden. Structure, conditions, due-diligence scope and price mechanics can be much harder to renegotiate after a term sheet is signed.

Does the buyer's lawyer decide the purchase price?

No. The buyer and its financial advisers determine the economics. Counsel translates the agreed mechanism into contractual terms and identifies legal consequences or gaps.

Is reviewing the SPA enough if the buyer is acquiring only a minority stake?

Usually not if ongoing governance matters. The buyer may also need a shareholders agreement and constitutional changes to secure board, information, reserved-matter, funding and exit rights.

This article is for general information only and does not constitute legal advice. Every transaction and every set of facts is different. Obtain specific advice from a qualified adviser before acting on any part of it.

If you are buying shares in a Malaysian company and need the transaction structure, SPA, risk allocation and completion package reviewed and negotiated before signing, Legal That Works can assist through our Share Sale and Purchase Agreement service.