Whether you are buying into an existing Singapore company or selling your stake to someone else, a properly drafted Share Purchase Agreement is essential to protecting your interests in the transaction. This guide explains what this kind of agreement typically costs, and what drives the price up or down.
Why This Document Genuinely Requires Careful, Bespoke Drafting
A Share Purchase Agreement, commonly called an SPA, is rarely a document you can safely adapt from a generic template, since it needs to reflect the specific terms of your particular transaction, including price, payment structure, warranties, and what happens if something turns out to be wrong with the company after the sale completes. This genuine need for bespoke, careful drafting is the main reason SPAs sit toward the higher end of typical corporate legal fees.
Who Typically Drafts the Agreement
In Singapore, it is generally accepted practice for the purchaser’s lawyers to prepare the first draft of the SPA, since the purchaser is usually the party seeking the most protection through detailed warranties and representations about the company being acquired. The seller’s lawyers then review, negotiate, and respond to this draft, meaning both sides typically incur their own separate legal fees throughout the process.
Typical Fees for a Straightforward Small Business Transaction
For a relatively straightforward acquisition of a small, privately held company, with a single class of shares and a manageable number of shareholders, legal fees for preparing or reviewing an SPA commonly range from around three thousand to eight thousand dollars per side, depending on how much negotiation the specific terms require.
Typical Fees for a More Complex Transaction
Where the transaction involves multiple shareholders, deferred consideration calculated against future performance, detailed warranty and indemnity provisions, or conditions precedent that need to be satisfied before completion, legal fees commonly rise to somewhere between eight thousand and twenty thousand dollars or more, reflecting the genuinely greater complexity and negotiation typically involved in getting these terms right for both sides.
Why Warranties and Indemnities Are Often the Most Negotiated, and Most Costly, Section
The warranties a seller gives about the company’s financial position, legal compliance, and general state of affairs, along with the indemnities addressing what happens if those warranties turn out to be inaccurate, are typically the most heavily negotiated part of an SPA. This section alone can account for a significant proportion of the total drafting and negotiation time, since both sides have genuinely opposing interests in how broadly or narrowly these provisions are framed.
Due Diligence Costs Are Often Separate From the SPA Itself
Before finalising an SPA, a purchaser typically conducts due diligence, reviewing the target company’s financial records, contracts, and legal standing. This due diligence process is usually billed separately from the SPA drafting itself, and can range considerably in cost depending on how thorough a review the purchaser requires and how complex the target company’s affairs turn out to be.
Costs for Related Documents
An SPA transaction often involves related documents beyond the core agreement itself, such as a disclosure letter, board and shareholder resolutions approving the transaction, and updated statutory registers reflecting the change in ownership. These are sometimes bundled into an overall quote and sometimes billed as additional, separate items, so it is worth clarifying exactly what a specific quote covers.
Fixed Fee Versus Hourly Billing
Given how genuinely unpredictable negotiation can be for this kind of transaction, many firms bill SPA work hourly, sometimes with an estimated range provided upfront based on the transaction’s apparent complexity. Some firms will offer a fixed fee for a genuinely straightforward, low-value transaction where the scope is well defined from the outset.
GST on Legal Fees
Where the firm you engage is GST-registered, the prevailing rate of nine percent applies on top of the quoted professional fee, which is worth factoring into your overall budget, particularly given how substantial legal fees for a complex SPA transaction can become.
Why Investing Properly in This Document Matters
Given that an SPA is often the single document that determines what protection you have if something goes wrong after a share purchase completes, whether an undisclosed liability or a warranty that turns out to be false, this is an area where cutting corners on legal cost can prove considerably more expensive later if a genuine dispute arises after completion.
Why the Buyer and Seller Rarely Share a Lawyer for This Transaction
Given the genuinely opposing interests involved, a buyer and seller in a share transaction essentially never use the same lawyer, for the same conflict of interest reasons that apply to a property sale. Each party’s lawyer is specifically working to protect that party’s own position, which is precisely why the negotiation over warranties, indemnities, and price adjustment mechanisms tends to take real time and genuine back and forth before both sides are satisfied that their respective interests are properly reflected in the final document.
Comparing Quotes When More Than One Firm Is in the Running
If you are choosing between firms for a genuinely significant SPA transaction, look beyond the headline hourly rate alone. Ask each firm about their specific experience with transactions of similar size and industry to yours, since a firm genuinely familiar with your sector often navigates the specific issues that tend to arise, such as industry-standard warranty positions, more efficiently than one encountering these particular considerations for the first time.
Planning Your Budget Around the Realistic Negotiation Timeline
Since SPA negotiations can extend over weeks or months depending on complexity, it is worth planning your legal budget with this realistic timeline in mind, particularly if you are being billed hourly, since a transaction that drags on due to genuine disagreement over terms will naturally accumulate more legal fees than one where both sides reach agreement relatively quickly.
How This Relates to a Shareholder Agreement
It is worth briefly distinguishing an SPA from a shareholder agreement, since the two are sometimes confused. An SPA governs a specific, one-off transaction between a willing buyer and seller of shares, while a shareholder agreement governs the ongoing relationship between a company’s existing owners over time. If your company already has a shareholder agreement in place, an incoming buyer under an SPA will generally need to formally accede to that existing agreement as part of completing the transaction, which is worth flagging to your lawyer early so this step is not overlooked.
Frequently Asked Questions
Does the purchaser always pay for drafting the SPA, or can this cost be shared with the seller?
Each party generally pays for their own legal representation throughout the transaction, including the purchaser’s lawyer drafting the initial agreement and the seller’s lawyer reviewing and negotiating it, rather than one party covering both sides’ costs.
Is it cheaper to use a business sale agreement instead of a share purchase agreement?
This depends on whether you are acquiring the shares of the company itself or its underlying business and assets, since these are structured quite differently, and the more appropriate structure for your specific transaction, rather than cost alone, should generally guide this decision.
Can I negotiate a fixed fee for an SPA even if my transaction is genuinely complex?
Some firms may agree to a capped fee arrangement even for a complex matter, providing some cost certainty while still reflecting genuine hourly effort, so it is worth asking directly whether this kind of structure is available.
Do I need a separate lawyer for tax advice on the transaction, or does this fall under the SPA lawyer’s scope?
Tax structuring advice is often treated as a distinct, specialised piece of work, sometimes handled by the same firm’s tax team and sometimes requiring a separate tax adviser, so it is worth clarifying this scope early in your engagement.
How long does it typically take to negotiate and finalise an SPA once legal fees start being incurred?
This varies considerably based on complexity, though a straightforward small business transaction might conclude within a few weeks, while a more complex transaction with extensive due diligence and negotiation can take several months from start to completion.
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About the Author: Randy Alta
